Market Concentration and Foreign Direct Investment (FDI) in the Finance Sector

The aim of the paper is to examine the relationship between market concentration and foreign direct investment (FDI) in the Serbian finance sector. Therefore, the banking, financial leasing, and insurance sector data were analyzed from Q4 2007 to Q4 2020. The ARDL approach was used to determine the long and short-term relationship between market concentration and FDI. The results show a significant positive relationship between market concentration and FDI in the long run, while a significant negative relationship in the short run. It means that competition worsens in the long term, while improves in the short term due to FDI because decreases in market concentration mean improvement of competition conditions.