Open Access Article SciPap-781
The Concentration and Profitability in the Czech Banking System
by Jan Černohorský 1,*

1 Faculty of Economics and Administration, Institute of Economic Sciences, University of Pardubice, Studenská 84, Pardubice 532 10, Czechia

* Authors to whom correspondence should be addressed.

Abstract: The aim of this paper is to assess the degree of concentration in the Czech banking sector and especially its relationship to profitability in the market. The paper is based on contemporary scientific knowledge based on literature research. There is calculated Herfindahl-Hirschman index of banking market in the Czech Republic in the years 2003-2012. The calculation of concentration is made for three variables - total assets, receivables from clients and deposits from clients. Subsequently, these values are compared with the development of profits in the Czech banking sector using correlation and regression analysis. Necessary tests for normality, autocorrelation and homoscedasticity are conducted before performing correlation and regression analyses. We can conclude that in the case of the Czech Republic, there is an inverse relationship between the degree of concentration and the size of the profits of the banking sector, which is not the standard output of previous studies. The results can be beneficial both to further scientific research and findings, as well as for practical pricing policy of banks, and of course for regulating activity of central banks in context to the licensing of banks.

Keywords: Profitability, Bank, Banking Market, Concentration

JEL classification:   C20 - General,   G21 - Banks • Depository Institutions • Micro Finance Institutions • Mortgages

SciPap 2015, 23(3), 781

Received: 25 August 2015 / Accepted: 17 December 2015 / Published: 21 December 2015