There has always been the question of the relation between concentration and profitability of the firms in the market. Market concentration is a term used to refer to the extent of domination of one or firms in a given market. Typically, it is a function of the number of firms and their corresponding share in the total production. In case of the banking sector, this becomes similar to the market share. Market share on the other hand is essentially the share of customers that a firm has over the total pool of potential customers. It can be in terms of production, sales or any other relevant factor as well.
Thus, from the above discussion, it is clear that the role of market share in the profitability of the banks is positive and statistically significant as pointed out by Smirlock (1985). On the other hand, there was no empirical evidence to suggest that the effect of market concentration in either of the two measures is either positive or statistically different from zero. However, this study has certain limitations. The study in its current state is limited to fewer banks and fewer geographies. With a more expansive dataset, more detailed analysis like panel data analysis can be conducted to understand the effect across sections i.e. geographies and across times within each and across geographies. Another possible improvement in the study can be to focus on economy instead of a larger group of economies. Such a study can capture the effects of one economy only but it will be efficient at it by capturing more number of banks within the economy.