This paper examines the impact of bank concentration on bank profitability and bank risk using a panel data set for Taiwan's banking industry from 1996 to 2005 and applies the system generalized-method-of-moments technique developed for dynamic panels. The main results show that (i) larger banks are associated with higher bank profitability and lower bank risk, (ii) higher bank concentration enhances bank profitability because of market power or efficiency, and (iii) a more concentrated banking structure reduces bank risk. This is because the positive effects of bank concentration are greater than the negative effects.