Analyses of Effect of Bank Branching on Deposit Market Share and Market Size in Iran Banking Industry

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Yousefi, Fateme | 2015

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Type of Document: M.Sc. Thesis
Language: Farsi
Document No: 47338 (44)
University: Sharif University of Technology
Department: Management and Economics
Advisor(s): Fatemi, Farshad
Abstract:
This thesis aim to the study of the effect of bank’s branching decisions on deposit market. Using panel data banks from Iran, we study effect of branching on market share and market size. In theoretical part, we assume that banks maximize discounted flow of the profits. We also assume that the banks take into account the reaction from rival banks in setting number of branches. Banks are assumed to expect the rival banks react by a lag of one period. In empirical part, in order to distinguish between aggregate market size effect and market share effect, we rewrite quantity of deposit in banks as the product of aggregate deposit and market share. We specify deposit market share function with constant elasticities. Finally, the cofficients of first order condition and market share function are estimated in a system of equations.Based on our finding, branching has a significant effect on bank’s market shares but not on total market size. The results show that banks don’t consider future reactions from rival
Keywords:
Market Share ; Branching Proccess ; Monopolistic Competition Model ; Nonprice Competition ; Deposit Market

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