Banking integration and market competition: Evidence from the ASEAN-6 countries

Abstract

This article investigates the effects of banking integration on banking competition in the ASEAN-6 countries. Using a data set of 3217 bank-year observations over the period 1996–2018, our main results indicate that: (i) banking openness positively affects banking competition; (ii) the overall degree of balanced (in/out) integration leads to greater market power; and (iii) the increase in the market monopoly following the participation of foreign banks can be reduced by good regulatory policies. These results remain intact when two alternative competition measures are employed and when a polynomial model and a threshold model are used to reveal the non-linear and heterogeneous effects of banking integration.