Market power, revenue diversification and bank stability: Evidence from selected South Asian countries

Nguyеn, My; Skully, Michael T.; Perera, Shrimal

doi:10.1016/j.intfin.2012.05.008

Cited by 145 publications

(97 citation statements)

References 45 publications

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“…However, this study is limited to 5 developed European countries. Other studies, like that of Nguyen et al (2012) support the idea that the bank can gain market power through nontraditional banking activities when it cut its interest margins or the interest rate of traditional credit products. It turns out that it is possible that market power and income diversification are simultaneously determined.…”

Section: The Literature Reviewmentioning

confidence: 98%

“…However, the implications of these earlier studies may not be applicable to emerging/developing countries. Indeed, differences in institutional and regulatory environments and the specific characteristics of banking markets in less developed/emerging countries and developed countries may justify different effects of changes in the income structure of the bank (Nguyen et al, 2012). In addition, the authors emphasize the benefits of income diversification in emerging markets and examine the relationship between banking market power and income diversification.…”

Section: The Literature Reviewmentioning

confidence: 99%

“…Like in Chien-Chiang et al (2014), Amidu and Wolfe (2013), Soedarmono et al (2011;2013), Nguyen et al (2012), Ariss (2010), Agoraki et al (2011) and others, we try to find an adequate measure of financial (in) stability in practice. To this end, we choose Z-score as an index that measures degree of stability of banks.…”

Section: Financial Stabilitymentioning

confidence: 99%

“…To examine the effect of the interaction between market power and income diversification on bank stability, we use an econometric model based on a vast theoretical and empirical literature liket the work of Nguyen et al (2012), Amidu and Wolfe (2013), Soedarmono et al (2011;2013), Chien-Chiang et al (2014) and Meslier et al (2014): …”

Section: The Modelmentioning

confidence: 99%

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The Effect of Diversification of Banking Products on the Relationship between Market Power and Financial Stability

Mensi¹,

Labidi²

2015

American Journal of Economics and Business Administration

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Abstract:In the context of financial liberalization, increased competition has spurred financial institutions to develop new products and new activities in order to meet demand, market development and increased competitiveness. This has made the relationship between market structure and financial stability more complicated and its study through the channel of diversification remains an unexplored area. The purpose of this paper is to test the interaction between market power, diversification and financial (in) stability. To this end, we examine a sample of 18 countries in the MENA region and 157 commercial banks during the period 2000-2013. Supporting the "competition-instability" hypothesis, our results revealed that low market power banks in the MENA region are less robust and more unstable when they less or poorly diversify their activities. Moreover, financial instability in this sector may result from a fierce competition among banks born from the desire to distinguish themselves by offering various nontraditional products, for which banks lack the experience to control its risks.

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Section: The Literature Reviewmentioning

confidence: 98%

Section: The Literature Reviewmentioning

confidence: 99%

Section: Financial Stabilitymentioning

confidence: 99%

Section: The Modelmentioning

confidence: 99%

See 2 more Smart Citations

The Effect of Diversification of Banking Products on the Relationship between Market Power and Financial Stability

Mensi¹,

Labidi²

2015

American Journal of Economics and Business Administration

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“…This is because noninterest income generating operations are highly volatile. However, diverging results have been found in the context of developing countries (Sanya and Wolfe, 2011;Nguyen and al., 2012;Pennathur and al., 2012). Thus, one of the aims of this study is to contribute to the limited literature that analyzes the impact of bank's income diversification on performance and stability in the context of developing economies.…”

Section: Introductionmentioning

confidence: 90%

Income Structure, Profitability and Stability in the Tunisian Banking Sector

Belguith¹,

Bellouma²

2017

engineering-journal

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Financial sector transparency, financial crises and market power: Across‐countryevidence

et al. 2020

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The study investigates how financial sector transparency moderates the influence of financial crises on bank market power across seventy-five economies between 2004 and 2014. Employing two-step dynamic system generalized method of moments the study shows that while public sector-led financial sector transparency reduces bank market power, private sector-led financial sector transparency promotes bank market power given that private sector-led transparency gives financial cost advantage to financially sound banks to solidify the market power and dominance. Similarly, while financial crises reduce the market power of banks implying that during financial crises banks lose their market power, financial sector transparency promotes the negative effect of financial crises on bank market power. This implies that during financial crises, financial sector transparency whether enforced through private or public sector, boosts the weakening effect of financial crises on bank market power. These findings imply that regulators can rely on financial transparency to tame bank market power to enhance banking competitiveness. The findings and results are consistent even when country, time and continental effects are controlled for.

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Market power, revenue diversification and bank stability: Evidence from selected South Asian countries

Cited by 145 publications

References 45 publications

The Effect of Diversification of Banking Products on the Relationship between Market Power and Financial Stability

The Effect of Diversification of Banking Products on the Relationship between Market Power and Financial Stability

Income Structure, Profitability and Stability in the Tunisian Banking Sector

Financial sector transparency, financial crises and market power: Across‐countryevidence

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