The Effect of Changes in Market Structure on Competition and Firm Profitability : Does Market Maturity Matter?

Having concluded that changes in market structure affect competition and firm performance within an industry, literature continous to alter between two grand theories: the quot;Structure-Conduct Performancequot; hypothesis and the quot;Efficient Structurequot; hypothesis. This paper proposes a link between the two concepts, using market maturity as intermediator. The central argument is that the degree of structural change dependency is positively mediated by financial market maturity. Utilizing a cross-country dataset, the paper provides evidence that the degree of financial market development mediates and hence ultimately sets the economic conditions in which banks compete. The results have direct implication on economic policy when comparing emerging and established financial service systems