Banking efficiency and competition: an empirical research on Macau's banking industry

This research examines the relationship between banking competition and efficiency using relevant data of Macau banking industry from 1999 to 2016. The key finding of this research is to demonstrate a clear causality between competition and efficiency in Macau’s banking industry throughout the study period. The interaction between two vital factors of the banking industry provides a solid empirical evidence for the practitioners and policymakers to make sound decisions accordingly. The most recent data show that there is a wide variation of key operational indicators of different banks in 2016. However, this study finds no evidence that the size of operations in terms of total bank loans would impact banks’ efficiency. Economies of scale or market share doesn’t necessarily bring cost efficiency in Macau’s banking industry