Bank concentration, competition and financial stability nexus in the East African Community: is there a trade-off?

Nyangu, Moses; Marwa, Nyankomo; Fanta, Ashenafi Beyene; Minja, Elinami J.

doi:10.1080/23322039.2022.2082026

Cited by 5 publications

(2 citation statements)

References 47 publications

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“…This may be due to the fact that Vietnamese banks operate under the strict control of the SBV, especially in the interest rate framework, which makes banks with different profiles of market power and lending capacity face the same difficulty in adjusting interest rates flexibly. Our mixed estimates on the impact of multiple competition measures are in line with some previous studies [ 18 , 30 , 44 , 45 ], thereby supporting the view that the conclusion could be misleading if we only rely on one competition measure.…”

Section: Resultssupporting

confidence: 90%

Is competition good or bad for the price, quantity, and quality of bank lending?

Huynh

2023

PLoS ONE

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This paper extends the existing literature by examining an important channel through which bank competition could drive the real economy by comprehensively influencing bank lending in three components–price, volume, and quality. For the measurement of bank competition, we build a series of different structural (concentration indicators) and non-structural (Lerner, Boone, and Panzar-Rose H-statistic indexes) measures, given that the reliance on solely one individual measure could lead to a misleading conclusion. Through a sample of commercial banks during 2007–2021 in a single Vietnamese banking market, we find a decline in bank loan growth and a rise in credit risk under the pressure of high competition. With respect to the association between bank competition and the price of credit, our empirical evidence is mixed based on different measures to analyze the banking market structure. Our findings support the view that greater competition results in a less proliferated banking sector with riskier assets. We also confirm that these findings are robust to additional tests, including employing alternative measures of bank lending dimensions and market structure, removing the periods of the financial crisis and the COVID-19 pandemic, and changing the empirical estimation technique. In addition, our deeper analysis reveals that the adverse impact of bank competition on lending, shown by reduced credit supply and increased credit risk, is less pronounced for banks with a higher degree of income diversification. This result suggests that bank diversification may protect the quantity and quality of bank lending from the detrimental competition effect.

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Section: Resultssupporting

confidence: 90%

Is competition good or bad for the price, quantity, and quality of bank lending?

Huynh

2023

PLoS ONE

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“…[ 52 ] in Latin America [ 53 ], in Spain [ 54 ], in MENA, and [ 55 ] in America also show inverted U-shaped associations. Nevertheless, neither the European market nor the East African Community exhibit the non-linear link between bank competitiveness and bank stability [ 24 , 56 ]. A study on the relationship between bank competitiveness and stability in Asia was conducted by Ref.…”

Section: Literature Reviewmentioning

confidence: 99%

Financial inclusion, competition and financial stability: New evidence from developing economies

Antwi,

Kong,

Gyimah

2024

Heliyon

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Bank competition and liquidity hoarding

Huynh

2023

Eurasian Econ Rev

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Bank concentration, competition and financial stability nexus in the East African Community: is there a trade-off?

Cited by 5 publications

References 47 publications

Is competition good or bad for the price, quantity, and quality of bank lending?

Is competition good or bad for the price, quantity, and quality of bank lending?

Financial inclusion, competition and financial stability: New evidence from developing economies

Bank competition and liquidity hoarding

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