Title: An empirical analysis of growth and consolidation in banking: a Markovian approach for the case of Russia

Authors: Henry Penikas; Anastasia Petrova

Addresses: Department of Applied Economics, International Laboratory on Decision Choice and Analysis, National Research University – Higher School of Economics, Moscow 111116, Russia ' Department of Finance, National Research University – Higher School of Economics, Moscow 111116, Russia

Abstract: This paper represents an empirical research of the growth process in the Russian banking sector during 2004-2010 years. The growth process is modelled by Markov chains. Nine states were used to describe the growth process. Markov chain stationarity check revealed three homogeneous periods. The forecast, based on adequate robustness proof, has been provided for 1, 3 and 10 years ahead. It was revealed that the number of banks is expected to decrease almost two times, whereas total assets are envisaged to grow more than 2.5 times and the return on assets is unlikely to increase more than by 12% in 10 years by 2020.

Keywords: Markov chains; modelling; banking consolidation; Russian banks; cluster analysis; transition matrix; Russia; banking growth; total assets; return on assets.

DOI: 10.1504/IJCEE.2014.060291

International Journal of Computational Economics and Econometrics, 2014 Vol.4 No.1/2, pp.112 - 129

Received: 03 Jul 2013
Accepted: 03 Jan 2014

Published online: 08 Apr 2014 *

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