Structure Conduct Performance (SCP) Paradigm in Pakistan Banking Sector: A Conceptual Framework and Performance of the First Woman Bank under SCP Model

Abstract

The study is aimed to analyze Structure-Conduct-Performance (SCP) model, in the context of Pakistan banking industry, which is to find relationship between market structure, behavior and more particularly the financial performance of the banking sector. The woman bank’s market share and business behavior are analyzed in SCP framework to examine performance of the bank being a special institution for women. The regression equation is used to achieve the analytical objectives of this study; using the most common tested relationship by SCP paradigm such as HHI (Hirshman-Herfindahl Index) which is a concentration measure used to analyze banking structure and ROA (Return On Asset), ROE (Return On Equity) and NIM (Net Interest Margin) which are profitability indicators. The results are spread over 35 banks in Pakistan, for analyzing correlation between variables, the time series data comprise the period 2004 to 2013. The results suggest that banking sector in Pakistan carries negative concentration ratios that impact directly on profitability, efficiency and innovation. The result indicated that after analyzing the woman bank there is a minor market share of the bank into the industry which makes us conclude that the reason behind the weak performance is its inefficient participation in banking industry. The study finds that there is a policy draw back that restricts woman banks for their proper operations to carry out.