The empirical measurement of competition and digitalization for the banking sector of Kyrgyzstan: Impacts of efficiency, profitability, and stability
Year: 2024
Type: article
Abstract: This study investigates the competitive dynamics and digitalization within Kyrgyzstan's banking sector. The study analyzes the interplay between bank competition, digitalization, profitability, and stability using the two-step Generalized Method of Moments. Banking competition is assessed from 2012 to 2022 via the Lerner Index and the Boone Indicator. Furthermore, a novel method is employed to estimate the bank digitalization index based on the System Dynamics Approach. Findings indicate a competitive landscape marked by monopolistic competition, where digitalization enhances operational efficiency and competitive advantage. However, increased market power inversely affects digital adoption, suggesting monopolistic banks innovate less than their competitive peers. Further, the study highlights that intensified competition and digital adoption may encourage riskier bank behaviors, aligning with competition-fragility theory. Digitalization improves profitability, advocating for banks to adopt innovations to surpass competitors and improve financial performance. Policymakers are advised to foster a balanced competitive environment that encourages innovation without compromising bank stability.
Author: Emil Begimkulov
Institution: University of Pecs
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: gold
Estimated APC paid: $750
OpenAlex ID: W4403152029