Bank Competition and Financial (In)Stability in Europe: A Sensitivity Analysis

Samantas, Ioannis

doi:10.2139/ssrn.2358999

Cited by 4 publications

(3 citation statements)

References 61 publications

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“…For example, building on the model of Body and De Nicolo (2005), Martinez-Miera and Repullo (2010) show evidences that the probability of bank default first goes down, but then does up after a certain point as bank completion increase. This approach is also supported by findings of Berger et al (2009), Jeona and Limb (2013), Jiménez, Lopez and Saurina (2013), Liu et al (2013), and Samantas (2013).…”

Section: Literature Reviewsupporting

confidence: 68%

Bank Stability and Competition: Evidence from Albanian Banking Market

Shijaku

2017

EJBE

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This paper analyses the inter-temporal competition-stability nexus after the global financial crises. For this reason, the empirical estimation approach follows a fivestep procedure. First, we utilise quarterly macroeconomic and balance sheet and income statement data for 16 banks operating in the Albanian banking sector over the period 2008-2015. Second, we calculate a new composite index as a measure of bank stability conditions, which includes a wide set of information rather than focusing only on one aspect of risk. Then, we construct a proxy for bank competition such as the Boone indicator. Empirical estimations are based on the General Method of Moments approach. A set of robustness checks include also the use of other alternative proxy of competition such as the Lerner index and the efficientadjusted Lerner index, profit elasticity and the Herfindahl index. Empirical results strongly support the "competition-stability" view after the global financial crisesthat higher degree of competition boosts further bank stability conditions. Results further indicate that greater concentration has also a negative impact on bank stability. Results imply also that bank stability is positively linked with macroeconomic conditions and capital ratio and inverse with operational efficiency. Finally, we do not find a non-linear relationship between competition and stability.

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Section: Literature Reviewsupporting

confidence: 68%

Bank Stability and Competition: Evidence from Albanian Banking Market

Shijaku

2017

EJBE

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“…Liu et al (2013) observe a "U" shaped relationship between competition and bank risk in case of 11 European countries. Likewise, the findings of Samantas (2013) for banks in EU countries reveal the existence of an inverse U-shaped association between market power and bank stability. In emerging markets, researchers also observed non-linear association.…”

Section: Empirical Literature On the Influence Of Bank Competition On Riskmentioning

confidence: 89%

“…Empirically, Boyd et al (2007), De Nicolo and Loukoianova (2007) and Schaeck et al (2009) support this view. Interestingly, Martinez-Miera and Repullo (2010), Tabak et al (2012) and Samantas (2013) observe a "U" shaped relationship between bank competition and risk.…”

Section: Introductionmentioning

confidence: 99%

Capital regulation, competition and risk-taking behavior of Indian banks in a simultaneous approach

Maji

Hazarika

2018

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Purpose The purpose of this paper is to investigate the association between capital regulation and risk-taking behavior of Indian banks after incorporating the influence of competition. Further, the study intends to enrich the existing literature by providing empirical evidence on the role of human resources in managing risk along with the influence of other bank specific and macroeconomic variables. Design/methodology/approach Secondary data on 39 listed Indian commercial banks are collected from “Capitaline Plus” corporate data database for a period of 15 years. Capital is measured by capital adequacy ratio as defined by the regulators, and two definitions of risk – credit risk and insolvency risk – are employed. Competition is measured by Herfindahl-Hirschman deposits index, concentration ratio and H-statistic. The value-added intellectual coefficient model is employed to compute human capital efficiency (HCE). Three-stage least squares technique in a simultaneous equation framework is used to estimate the coefficients. Findings The study finds that absolute level of regulatory capital and bank risk are positively associated, although the influence of capital on risk is not statistically significant. The influence of competition on risk is negative for all the models, which supports the “competition stability” view. The impact of human capital on bank risk is also negative for all cases. Practical implications The findings of the study are useful for the decision makers in several ways based on the inverse influence of competition and HCE on bank risk. Further, the observed positive association between capital and risk indicates that the capital regulation is not sufficient to enhance the stability in the banking sector. Originality/value This is the first study in the Indian context that incorporates the competition in the banking industry as an explanatory variable in the extant bank capital and risk relationship.

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Another Look at ‘Bank Competition and Financial Stability: Much Ado About Nothing’?

Bandaranayake

Das

Reed

2020

Journal of Economic Surveys

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This study replicates Zigraiova and Havranek's (2016) meta‐analysis of banking competition and financial stability. It performs multiple types of replications: a ‘Reproduction’ replication where Z&H's data and code are verified to reproduce the results of their study; a ‘Repetition’ replication where the studies used by Z&H are independently recoded and then re‐analysed; an ‘Extension’ replication where additional studies on banking competition and stability are analysed; and a ‘Robustness Analysis’ where we check Z&H's results using an alternative empirical procedure. Our analysis strongly confirms Z&H's main finding that competition in the banking sector has an economically negligible effect on financial stability. This result is consistently confirmed across a variety of replication analyses. Most impressively, we confirm their finding even when we analyse a completely independent set of 35 studies not included in Z&H's meta‐analysis. Our results for Z&H's other findings are less supportive. As the first comprehensive replication of a meta‐analysis, this study also provides insights into the robustness of meta‐analysis. We find that meta‐regression analysis, where estimated effects are related to data, estimation, and study characteristics, is sensitive to how data are coded and to the choice of estimation procedure; and that this sensitivity extends to ‘best practice’ estimates.

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Bank Competition and Financial (In)Stability in Europe: A Sensitivity Analysis

Cited by 4 publications

References 61 publications

Bank Stability and Competition: Evidence from Albanian Banking Market

Bank Stability and Competition: Evidence from Albanian Banking Market

Capital regulation, competition and risk-taking behavior of Indian banks in a simultaneous approach

Another Look at ‘Bank Competition and Financial Stability: Much Ado About Nothing’?

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