Competition in Iran’s Banking Sector: Panzar-Rosse Approach

The iranian banking sector has undergone huge and substantial reform in the last decade; privatization, establishment of private banks and development of modern technologies (it). this paper investigates the competitive condition of the iranian banking industry over the period 2005-2010 using the h-statistic proposed by panzar and rosse. the properties of this non-structural methodology make it an excellent framework for assessing the degree of competition in the banking industry. to calculate h statistics, a reduced form of revenue equation was estimated. the calculated h statistics for the whole sample period was 0.7101.the extent of h statistics and the result of wald test indicate that the structure of iranian banking sector is neither monopoly nor competition. our findings were in favor of monopolistic competition.