The bright side of market power in Asian banking: Implications of bank capitalization and financial freedom

Santoso, Wimboh; Yusgiantoro, Inka; Soedarmono, Wahyoe; Prasetyantoko, Agustinus

doi:10.1016/j.ribaf.2020.101358

Cited by 22 publications

(26 citation statements)

References 45 publications

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“…Our baseline findings present that competition has a negative and significant impact on bank stability. These results support the competition-fragility view and the prior literature (Danisman & Demirel, 2019;Fu et al, 2014;Santoso et al, 2021).…”

Section: Introductionsupporting

confidence: 91%

“…As a result, it impacted bank fragility, both individually and systemically, and culminated in the global financial crisis of 2007 to 2009. Several previous studies have shown support for this view (Anginer, Demirguc-Kunt, & Zhu, 2014;Beck et al, 2013;Jiménez, Lopez, & Saurina, 2013;Risfandy, Tarazi, & Trinugroho, 2020;Santoso, Yusgiantoro, Soedarmono, & Prasetyantoko, 2021). Besides, based on the bank relationship hypothesis, a competitive environment results in banks obtaining fewer information rents, reducing the incentives to filter and monitor the borrowers (Allen & Gale, 2004).…”

Section: Introductionmentioning

confidence: 91%

“…First, Asian countries are laboratories for implementing various banking sector policies. Besides, the pattern of financial globalization has encouraged banks in Asia to develop (Fu et al, 2014;Santoso et al, 2021;Soedarmono et al, 2013). The crisis demonstrated a marked weakness in many global banks, leading to extensive regulatory reforms.…”

Section: Introductionmentioning

confidence: 99%

“…Our empirical analysis includes 427 commercial banks in 11 Asian countries, it uses the z-score to proxy bank stability following a previous study (Agoraki, Delis, & Pasiouras, 2011;Fu et al, 2014;Laeven & Levine, 2009;Lepetit & Strobel, 2013;Risfandy et al, 2020;Santoso et al, 2021), and the Lerner Index to proxy bank competition. Our baseline findings present that competition has a negative and significant impact on bank stability.…”

Section: Introductionmentioning

confidence: 99%

“…Unlike the prior literature (Fu et al, 2014;Santoso et al, 2021;Yusgiantoro, Soedarmono, & Tarazi, 2019), this study contributes to several aspects of the literature. First, prior research used pre-GFC datasets.…”

Section: Introductionmentioning

confidence: 99%

See 4 more Smart Citations

Does Institutional Quality Matter in the Relationship Between Competition and Bank Stability? Evidence from Asia

Muizzuddin

Tandelilin

Hanafi

et al. 2021

JIEB

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Introduction/Main Objectives: This study aims to investigate whether competition impacts bank stability. Furthermore, the study also analyzes the role of institutional quality in a country, such as voice and accountability, political stability, government effectiveness, regulatory quality, the rule of law, and control of corruption, forming the effect of competition on bank stability. Background Problem: Analysis of the relationship between competition and bank stability has been at the center of academic and policy debate. However, the theoretical and empirical research has not concluded whether bank competition leads to more or fewer stable banks. Novelty: We consider institutional quality's role in mitigating the negative impact of competition on bank stability, which has mainly been under-elaborated in prior studies, particularly in using measures from The World Bank’s Worldwide Governance Indicators, which measure how the institutions of each country influence bankers’ and the people's behavior, as part of the cultural system. Research Methods: Using a sample of 427 Asian commercial banks from 2011 to 2019, we employ the generalized method of moments (GMM) estimator and consider loan growth and the cost to income ratio as instrumental variables. Findings/Results: We find robust evidence that competition erodes bank stability. Besides, better institutional quality, especially government effectiveness, regulatory quality, the rule of law, and corruption control in each country are important aspects that promote bank stability and mitigate the negative impact of competition on bank stability. Conclusion: Competition has a negative impact on bank stability. Meanwhile, the quality of institutions can both promote bank stability and mitigate this negative relationship.

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Section: Introductionsupporting

confidence: 91%

Section: Introductionmentioning

confidence: 91%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

Does Institutional Quality Matter in the Relationship Between Competition and Bank Stability? Evidence from Asia

Muizzuddin

Tandelilin

Hanafi

et al. 2021

JIEB

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Does ESG performance impact value and risk‐taking by commercial banks? Evidence from emerging market economies

Gangwani,

Kashiramka

2024

Bus Strat Env

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The study examines the impact of environmental, social, and governance (ESG) performance on the value and risk‐taking behavior of listed commercial banks in emerging market economies (EMEs). The study analyzes a comprehensive sample of 178 commercial banks listed in the top 20 emerging markets from 2015 to 2021. The study employs the System generalized method of moments (GMM) with Arellano‐Bond estimation to address the endogeneity issue. The results indicate that banks with higher ESG disclosure scores are linked to reduced risks for commercial banks such as insolvency, leverage, and liquidity risks, in line with shareholder theory. Furthermore, the results demonstrate that sample banks with higher ESG disclosure scores show better accounting (ROE and ROA) and market (Tobin's Q) performance, supporting both agency theory and resource‐based theory. The robustness tests validate the consistency of the results.

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Competition and banking efficiency in the WAEMU: The role of multinationals and institutions

Kuessi,

Nantob,

Aguey

et al. 2023

International Economics

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The bright side of market power in Asian banking: Implications of bank capitalization and financial freedom

Cited by 22 publications

References 45 publications

Does Institutional Quality Matter in the Relationship Between Competition and Bank Stability? Evidence from Asia

Does Institutional Quality Matter in the Relationship Between Competition and Bank Stability? Evidence from Asia

Does ESG performance impact value and risk‐taking by commercial banks? Evidence from emerging market economies

Competition and banking efficiency in the WAEMU: The role of multinationals and institutions

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