Industry structure and market performance of the Malaysian construction industry
The construction sector is one of the important sector in the Malaysian economy in terms of its contribution to the Gross Domestic Product (GDP). This study analyse the industry structure and its performance using the Structure-Conduct Performance paradigm approach. The market concentration me...
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| Main Author: | |
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| Format: | Thesis |
| Language: | English |
| Published: |
2015
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| Subjects: | |
| Online Access: | http://psasir.upm.edu.my/id/eprint/68186/1/fep%202015%2036%20ir.pdf |
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| Summary: | The construction sector is one of the important sector in the Malaysian economy in
terms of its contribution to the Gross Domestic Product (GDP). This study analyse the
industry structure and its performance using the Structure-Conduct Performance
paradigm approach. The market concentration measurements, measures namely;
Concentration Ratio (CR), Herfindahl Hirschman Index (HHI), Hanna and Kay Index
(HK), Entropy Index (EI), and GINI Coefficient (GINI). Economic profit is used to
determine the relationship between the industry structure and its performance. The
profitability of an industry is considered as average rate of return on capital which will
evaluate industry performance. The profitability of the industry has shown high
correlation with the market concentration and market share.
This study estimate from year 2000 until 2012 and data obtained from the annual
report of the construction firm’s listed in Kuala Lumpur Stock Exchange Market
(BURSA Malaysia). Panel data analysis estimation results showed that the random
effect model is the most appropriate model.
For this period, CR4 and CR8; HHI; HK; and GINI, shows that the construction
industry is moving towards a concentrated market structure and indicative of oligopoly
market. The Entropy index shows that the industry is moving towards the noncompetitive
market. Results from panel data regression shows that the market share
and market concentration are significant in determining the profitability of the large
firm. The entry barrier is also found to be significant as represented by the positive
effect of market concentration and market share. We concluded that the construction
industry has an oligopolistic characteristic with less number of firms, and high
profitability due to high degree of concentration level.
Empirical findings have provided some basis of the industry structure based on the
determination of concentration level in the Malaysian construction industry. The result
can bring some amendments to the policy measure in order to ensure that the market structure does not involve monopolistic practices. Many factors which influence the
non-competitive market structure, such as the absence of the policy implementation
and do the policy favour the potential of dominant firm. This analysis can provide
some regulation and policy implications that are parallel with the government’s
objective in ensuring a more competitive industry in the economy as a whole. |
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