Banking, economic growth, market structure, and institutional quality through the perspective of business performance and responsibility

This paper reviews the theoretical foundations and implications of the role of banking in promoting economic growth. Based on financial intermediation theory, the paper underscores the crucial role of banks in facilitating the optimal allocation of resources, managing risks, and supporting economic development. Additionally, this paper addresses the differences between the structure-conduct-performance (SCP) hypothesis and the efficiency hypothesis (EH) and recognizes how each approach influences the banking industry in different contexts, with a particular focus on emerging and developed economies. Also, the paper highlights the importance of regulatory framework and institutional quality in shaping the effectiveness of banking systems, emphasizing the need for balanced regulation to promote stability without stifling innovation. According to these visions, policymakers should focus on stimulating competition, reinforcing regulatory and governance structures, and boosting technological advancements to improve banking efficiency. Furthermore, digital banking and financial inclusion are needed to enhance accessibility and competitiveness. Policymakers and regulators should implement a holistic approach that prioritizes innovation, regulatory quality, and financial stability to safeguard sustainable economic growth.