Abstract:

Bank profitability is considered an essential indicator of financial stability, leading many researchers to focus on its main determinants. Various theoretical and empirical studies imply that the performance of banks and the structure of the banking sector influence bank profitability. The Albanian banking sector has undergone numerous structural changes, characterized by a moderate concentration level in recent years. On the other hand, the banking profitability indicator remained mostly stable despite occasional fluctuations. This research examines the empirical nature of the relationship between market structure and profitability in the Albanian banking sector. The nonstructural approaches related to the bank profitability literature on the relationship between competition and performance in the banking sector embrace (i) the structure-conduct performance (SCP) hypothesis and (ii) the efficiency structure (EFS) hypothesis. Despite this, by using a dataset of the Albanian banking sector during 2010 – 2021, this study uses the structure-conduct performance (SCP) hypothesis to prove this relationship. Empirical evidence supports the traditional paradigm that structural features and concentration determine the banking sector's profitability.

Keywords:

Market structure, banking concentration, banking profitability.

JEL Classification:

G 21, L 10, L 25, C 51.

How to Cite:

Ergita Kokaveshi and Enton Duro. Bank Concentration and Profitability: Evidence from Albanian Banking System. [ref]: vol.21.2023. available at: https://refpress.org/ref-vol21-a276/