An empirical analysis of concentration, efficiency and the profitability of selected Philippine rural banks for 2010-2014

Date of Publication


Document Type

Bachelor's Thesis

Degree Name

Bachelor of Science in Management of Financial Institutions

Subject Categories

Finance and Financial Management


Ramon V. Del Rosario College of Business


Financial Management Department

Thesis Adviser

Dexter Ginete

Defense Panel Member

Edralin Lim

Marycris O. Albao

Rene Betita

Patiu, Liberty, Dr., Thesis coordinator


Rural banks are financial institutions that focused on developing and promoting growth in rural communities that are untapped by other larger financial institutions. These types of banks commonly found in isolated and under developed provinces which makes them vital for regional growth. In attempting to understand the profitability of rural banks, the researchers looked to market concentration and efficiency as possible drivers of profitability. Hence, this study aims to do an in-depth analysis on the market concentration, efficiency and profitability of selected Philippine rural banks.

This study analyzes the effect of market concentration through C3 ratio, C5 ratio and Herfindahl-Hirschman index (HHI) and efficiency through a stochastic frontier approach in regards to the profitability of Philippine rural banks measured in return on equity and return on asset. The study also compared market concentration and efficiency in terms of their impact on profitability and identified other factors that affect the profitability of rural banks.

Upon analysis of the data gathered, the researchers found that market concentration measured in Herfindahl-Hirschman index (HHI) has a significant effect on return on equity while efficiency measured in a rural banks respective efficiency scores are insignificant. The researchers also found that efficiency have a better predicting ability compared to market concentration and identified credit risk management, CAMELS, GDP, inflation and accessibility as other factors that affect profitability.

Abstract Format






Accession Number


Shelf Location

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

Physical Description

viii, 123, 4 leaves : illustrations ; 29 cm.


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

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