The impact of competition on bank performance in Bangladesh: an empirical study

This paper attempts to assess bank performance, competition and their relationship empirically by using banking sector data (1983-2011) and individual bank data (2001-2011) from Bangladesh. Return on assets and data envelopment analysis grounded bank efficiency are used as bank performance measures, whereas eight structural measures are employed for assessing competition followed by the adoption of regression analysis for identifying its impact. The findings report an improvement of bank performance with a few fluctuations in between the sample periods under study. On the other hand, the level of competition has been consistently increasing in the banking sector, as pointed out by all structural measures. The regression result shows evidence of a negative relationship between competition and bank performance. It is required to revisit the structural changes of the banking sector. In particular, the regulatory authorities need to ensure necessary incentives for banks, particularly for private banks, to improve their performance in terms of profitability and efficiency.