Evaluation of the Market Structure in Iran’s Banking Industry

In the present study, the market structure of Iran’s banking industry is evaluated by using two measure of concentration and competition during the period of 2008- 2017. For this purpose, the k firm Concentration Ratio, the Herfindahl- Hirschman, the Hannah- Kay, the Hall-Tideman, the Comprehensive Industrial Concentration, and the Entropy are used to measure concentration. In addition the Panzar-Rosse statistic  is used to evaluate competition in Iran's banking sector. The various concentration indexes calculated based on total assets, total loans and total deposits of the 19 under study banks had an almost declining trend, which indicate that Iran’s banking industry has been moving towards competitive conditions. It is while, the estimated Panzar- Rosse statistic, as a competition index, had a fluctuating trend during the under study period and indicates the existence of a monopoly competition in the Iran's banking industry. A positive and strong correlation between different concentration indexes, along with a negative and weak correlation between different concentration indexes and the Panzar-Rosse statistic, besides the shortcomings of the structural approach to measure competition, show that the use of a non-structural approach, such as the Panzar-Rosse is more suitable for evaluating the Iran's Banking Industry.