An empirical analysis of the structure-performance relationship in the Philippine commercial banking industry, 1990-2005

Date of Publication

2006

Document Type

Bachelor's Thesis

Degree Name

Bachelor of Science in Commerce Major in Management of Financial Institutions

Subject Categories

Finance and Financial Management

College

Ramon V. Del Rosario College of Business

Department/Unit

Financial Management

Thesis Adviser

Rene B. Hapitan

Defense Panel Member

Pinky S. Padronia
Vivian Y. Eleazar
Angelo B. Taningco

Abstract/Summary

The objective of this paper is to empirically test the applicability of the structure-performance hypothesis in the Philippine commercial banking industry. The analysis is drawn upon a balanced panel data set collected from sixteen commercial banks over the period 1990 to 2005. Using a bank profitability model grounded on existing literature, the researcher finds that the structure-performance relationship does not exist in the Philippine commercial banking industry. Neither individual market shares nor indices of market concentration affect the profitability of banks significantly. Empirical evidence however is found for the efficient structure hypothesis. The results indicate that total assets turnover, a widely used measure of bank efficiency, positively impacts bank profitability. The other factors that affect bank profitability positively include bank growth, capital adequacy, and reliance on demand deposits. The occurence of the Asian financial crisis exerted a significant downward pressure on bank profitability. Non empirical relationship is established for bank size, bank risk, and loan-to-asset ratio. Based on the findings, a strategy like entering the industry as a big player with strong brand identification or forming a mega-banking institution through a merger or consolidation will not necessarily work in the Philippines. To achieve a higher level of profitability, banks have to focus their attention to improving their operational efficiency. Therefore, Bangko Sentral ng Pilipinas should adopt a regulatory and supervisory framework geared at improving the efficiency of commercial banks in the Philippines.

Abstract Format

html

Language

English

Format

Print

Accession Number

TU21231

Shelf Location

Archives, The Learning Commons, 12F, Henry Sy Sr. Hall

Physical Description

112, [5] leaves : illustrations

Keywords

Banks and banking--Philippines; Bank profits--Philippines

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