Does Competition Reduce the Risk of Bank Failure?

Martínez-Miera, David; Repullo, Rafael

doi:10.1093/rfs/hhq057

Cited by 496 publications

(113 citation statements)

References 16 publications

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“…The first column of the table reports the regression results using the efficiency-adjusted Lerner index as a measure of competition. The efficiency-adjusted Lerner index and its square are significantly negative, suggesting that an increase in market power causes a decline in the banking risk, which is supportive of the franchise value paradigm instead of a U-shaped relationship proposed by Martinez-Miera and Repullo (2010). Our results are consistent with the results of Jimenez et al (2013) 28 .…”

Section: Empirical Analysissupporting

confidence: 87%

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Bank competition, concentration and financial stability in the Turkish banking industry

2015

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Section: Empirical Analysissupporting

confidence: 87%

“…Hence, using a single country data might produce more insight on this relationship 5 . The other contribution of 2 See Marcus (1984) and Keeley (1990) and Martinez-Miera and Repullo (2010). 3 See Boyd and De Nicolo (2005).…”

mentioning

confidence: 99%

Bank competition, concentration and financial stability in the Turkish banking industry

2015

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“…This relation was confirmed by several other studies (Demsetz et al, 1996;Galloway et al, 1997;Gan, 2004;Gonzalez, 2005;). Saunders and Wilson (2001), Jones et al (2011), Martinez-Miera andRepullo (2010) and Niu (2012), find a non-linear relation under shape (U) between the Charter value and risk-taking.…”

Section: The Relation Between the Charter Value And The Risk-takingmentioning

confidence: 97%

What Risks for the Profitability of the Banking Sector

Gargouri¹,

Boujelben²

2014

IJEF

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This article attempts to determine the reasons of banks' failure relying heavily on the relationship between corporate governance of banks, the value of charter and risk taking. It focuses on the concept of market discipline in the banking sector. In general, the bank faces three problems: the failure of its client, increased competition and adaptation to new information and communication technologies. Our task is to show the impact of excessive risk-taking on bank profitability. It seems essential to take into account the consequences of strategic interactions of the efficiency of the banking system. The question is how we can control the level of risk-taking in the banking sector.Our study focuses on the banking markets of seven developed countries. Our sample consists of 41 banks over the period 2000-2012. It is important to determine the disciplinary role of the shareholder in examining the effect of charter value on risk-taking by banks. Our goal is to show that the charter value can be considered as a factor of leaders' self-discipline towards risk taking. We tested the model of two simultaneous equations (3SLS) and we found that the value of charter plays a role of self-discipline only for risk capital and assets. This charter value increases the risk of insolvency. However it has no effect on the credit risk.

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“…In addition, Martinez and Repullo (2010), on the basis of competitive stability, improved the static equilibrium model and proposed the MMR model. Their research shows that there is a "U"type relationship between competition and financial stability.…”

Section: Literature and Reviewmentioning

confidence: 99%

Regulation, Competition and Bank Risk: Evidence from China

Liu¹

2017

ABR

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This paper uses the semi-annual data of 16 listed banks from the fourth quarter of 2005 to the second quarter of 2016 as the research sample to study the impact of supervision and competition on the listed bank's risk in China. The results show that the higher level of bank holdings (capital adequacy ratio and core capital adequacy ratio) can significantly reduce the combined risk of banks and increase bank stability. Increased liquidity (liquidity ratio and deposit-loan ratio) can reduce bank risk, but this effect is not significant. The more fierce competition among banks (the smaller CR) will not only increase the proportion of weighted risk assets in total assets, but also increase the bank's bankruptcy probability and reduce the overall operating stability of the bank. It is necessary for authorities of policy to strengthen supervision of banking industry, especially the capital adequacy ratio and core capital adequacy ratio regulation and keep the competition of banks under the appropriate interval. It is also necessary for regulators to comply with the latest regulations of Basel III to set up more reasonable liquidity regulatory indicators to meet liquidity risk management.

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Does Competition Reduce the Risk of Bank Failure?

Cited by 496 publications

References 16 publications

Bank competition, concentration and financial stability in the Turkish banking industry

Bank competition, concentration and financial stability in the Turkish banking industry

What Risks for the Profitability of the Banking Sector

Regulation, Competition and Bank Risk: Evidence from China

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