Empirical Research On Relationship Between Market Structure And Market Performance Of Chinese Bankcard Industry Finance

With the rapid development of information technology and the change of time,the modern information industry is permeating through all aspects of life. As anemerging electronic payment technology, bank card transaction is changing thetraditional operation mode of financial business gradually. The convenience and highspeed of bank card transaction makes it beyond comparison of all traditional ones. Asan electronic payment combining consumption, credit and transfer, bank cardtransaction is now playing an increasingly important role in daily life. Thesubstitution of cash by card in consumption has also contributed to the explosion ofbank card acceptance market such as merchant ATM and POS. In recent years, thebank card industry in China has presented a trend of rapid development with a yearlyincrease of bank card circulation and a substantial growth of transaction values. Theexpansion of bank card industry scale has led to the transformation of its marketstructure as well. However, bank industry in China starts late, as a result, despite itsrapid development, there is still a gap compared with that of the developed countriesand regions. Meanwhile, there are numerous deficiencies in its market structure andmarket performance.Based on related features of bankcard industry and theories on market structure,this paper analyzes the current situation and development trend of bankcard marketstructure from the aspects of card market and acceptance markets to collect relevantdata. Taking the unique bilateral market trait of bankcard industry into consideration,the paper builds a basic mode based on Smirlock M’s Market-power Hypothesis andthe mode of Efficient Structure Hypothesis, so as to verify the relation betweenmarket structure and market performance of bankcard industry. The paper first putsforward a few assumptions on the relation between market shares and marketperformance of bankcard industry. Then, it gives an analysis of the1,500groups ofpanal data chosen from15most influential commercial banks in China from2003to2012. After unit root test and co-integration test on the panal data, this paper utilizesHausman Test and panal data mode to verify the mode based on panal data’s differentways of dealing with individual effects and finally comes up with the “Constant coefficient of random effects model”. In the end, the paper verifies this mode throughempirical test and comes to a conclusion.Real evidence demonstrates a negative correlation between market concentrationand performance in China’s bankcard industry, and a positive correlation betweenmarket structure and performance. The conclusion of this paper rejects the hypothesisof Harvard School and Chicago School and proves a shift to monopolistic competitionof the market structure in Chinese bankcard industry. Based on thetheoretical analysis and empirical findings in the former part of the paper, the endingpart will come up with related countermeasures and suggestions on how to optimizethe market structure, how to increase the operation efficiency o f commercial banksand how to realize large-scale operation.