CONCENTRATION EFFECT ON THE EFFICIENCY OF BANKING SECTOR IN THE REPUBLIC OF SERBIA

For qualitative analysis of the effect of specific activities, such as banking, on other movements in this sector, precise measuring is needed. Due to the transformation of the banking sector in the Republic of Serbia, in a relatively short period of time, there has been a significant reduction in the number of banks and in increasing the concentration. On the other hand, the business efficiency has become a key factor for the survival of banks in the market. In this study, the concentration was measured by Herfindahl-HirschamIndex, while the degree of efficiency was determined by cost to income ratio. A linear correlation and regression analysis examined the relationship between the degree of concentration and the level of efficiency of Serbian banking sector in the time interval from 2008 to 2015, which confirmed the existence of a strong relationship between these variables