Testing the structure-conduct-performance relationship for ASEAN: Addressing the issues in the panel mediation

We test the structure-conduct-performance (SCP) hypothesis for ASEAN, which predicts that the concentrated markets allow banks to collude and earn higher profits through monopoly pricing. We propose a new estimation approach that corrects the methodological issues in previous studies by including lags of explanatory variables and autoregressive terms in estimated models. The estimation results imply that the banks’ profitability in a concentrated market is entirely attributable to the anti-competitive behavior of banks. From a theoretical perspective, the findings exclude the alternative explanations – i.e. the efficient structure (ES) hypothesis or the relative market (RMP) hypothesis – for the SCP relationship in ASEAN.