Relevance of Structure, Conduct and Performance Paradigm in the Nigerian Banking Industry

Abstract

The main objective of this study is to examine the structure, conduct and performance (SCP) paradigm within the context of the Nigerian banking industry. The analysis is based on data collected from the annual report of twenty commercial banks listed in the Nigeria stock exchange; and Central Bank of Nigeria’s Annual report and statement of Account between 2005 to 2008. The study employed “Hausman specification test” which is also known as indirect least squares (ILS) in testing for the simultaneity among the three variables in the model and Durbin-Watson test to detect the degree of autocorrelation among these variables. The results of these findings shows that, there is a positive relationship between the bank performance (profitability) and some of the variables under consideration (market share, index of market concentration, risk management and customer’s deposit) whereas, loan disbursement was negatively related to profitability. The fact that market structure and performance has a positive effect on both ways is an indication that persistent increase in the size of banks will raise the bank performance vice -versa.

Keywords: Market Structure, Market Conduct, Market Performance, Banking industry and autocorrelation,