This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

The Theory of Bank Risk Taking and Competition Revisited

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
JOHN H. BOYD
GIANNI DE NICOLÃ
Abstract

There is a large body of literature that concludes that-when confronted with increased competition-banks rationally choose more risky portfolios. We argue that this literature has had a significant influence on regulators and central bankers. We review the empirical literature and conclude that the evidence is best described as "mixed." We then show that existing theoretical analyses of this topic are fragile, since there exist fundamental risk-incentive mechanisms that operate in exactly the opposite direction, causing banks to become more risky as their markets become more concentrated. These mechanisms should be essential ingredients of models of bank competition. Copyright 2005 by The American Finance Association.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1540-6261.2005.00763.x
File Format: text/html
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Publisher Info
Article provided by American Finance Association in its journal The Journal of Finance.

Volume (Year): 60 (2005)
Issue (Month): 3 (06)
Pages: 1329-1343
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:bla:jfinan:v:60:y:2005:i:3:p:1329-1343

Contact details of provider:
Web page: http://www.afajof.org/
More information through EDIRC

Order Information:
Web: http://www.afajof.org/membership/join.asp

For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).

Related research
Keywords:

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Hakenes, Hendrik & Schnabel, Isabel, 2005. "Bank Size and Risk-Taking under Basel II," Sonderforschungsbereich 504 Publications 05-07, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim. [Downloadable!]
    Other versions:
    • Hendrik Hakenes & Isabel Schnabel, 2006. "Bank Size and Risk-Taking under Basel II," Discussion Papers 88, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
  2. Astrid Dick & Andreas Lehnert, 2007. "Personal bankruptcy and credit market competition," Staff Reports 272, Federal Reserve Bank of New York. [Downloadable!]
  3. Gianni De Nicoló & Marcella Lucchetta, 2009. "Financial Intermediation, Competition, and Risk: A General Equilibrium Exposition," IMF Working Papers 09/105, International Monetary Fund. [Downloadable!]
  4. Gianni De Nicoló & John H. Boyd & Abu M. Jalal, 2007. "Bank Risk-Taking and Competition Revisited: New Theory and New Evidence," IMF Working Papers 06/297, International Monetary Fund. [Downloadable!]
  5. Pasricha, Gurnain, 2009. "Bank Competition and International Financial Integration: Evidence using a new Index," MPRA Paper 16767, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  6. Hasan, Iftekhar & Koetter , Michael & Wedow, Michael, 2009. "Regional growth and finance in Europe: Is there a quality effect of bank efficiency?," Research Discussion Papers 13/2009, Bank of Finland. [Downloadable!]
    Other versions:
  7. Wagner, W.B., 2007. "Loan Market Competition and Bank Risk-Taking," Discussion Paper 2007-010, Tilburg University, Tilburg Law and Economic Center. [Downloadable!]
  8. Fungacova, Zuzana & Weill, Laurent, 2009. "How market power influences bank failures: Evidence from Russia," BOFIT Discussion Papers 12/2009, Bank of Finland, Institute for Economies in Transition. [Downloadable!]
  9. Agoraki, Maria-Eleni & Delis, Manthos D & Pasiouras, Fotios, 2009. "Regulations, competition and bank risk-taking in transition countries," MPRA Paper 16495, University Library of Munich, Germany. [Downloadable!]
  10. Gabriel Jiménez & Jose A. Lopez & Jesús Saurina, 2007. "How does competition impact bank risk-taking?," Working Paper Series 2007-23, Federal Reserve Bank of San Francisco. [Downloadable!]
  11. Philipp Paulus, 2006. "Brüssel, Frankfurt oder Basel - Wo muss das Problem steigender Staatsschulden in der Europäischen Währungsunion gelöst werden?," Otto-Wolff-Institut Discussion Paper Series 01/2006, Otto-Wolff-Institut für Wirtschaftsordnung, Köln, Deutschland. [Downloadable!]
  12. Kaniska Dam & Marc Escrihuela-Villar & Santiago Sanchez-Pages, 2009. "On the Relationship between Market Power and Bank Risk Taking," ESE Discussion Papers 187, Edinburgh School of Economics, University of Edinburgh. [Downloadable!]
  13. Luc Laeven & Ross Levine, 2008. "Bank Governance, Regulation, and Risk Taking," NBER Working Papers 14113, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Koetter, Michael & Poghosyan, Tigran, 2008. "The implications of latent technology regimes for competition and efficiency in banking," Discussion Paper Series 2: Banking and Financial Studies 2008,15, Deutsche Bundesbank, Research Centre. [Downloadable!]
  15. Benjamin Miranda Tabak & Solange Maria Guerra & Eduardo José Araújo Lima & Eui Jung Chang, 2007. "The Stability-Concentration Relationship in the Brazilian Banking System," Working Papers Series 145, Central Bank of Brazil, Research Department. [Downloadable!]
    Other versions:
  16. Nicola Cetorelli & Beverly Hirtle & Donald Morgan & Stavros Peristiani & João Santos, 2007. "Trends in financial market concentration and their implications for market stability," Economic Policy Review, Federal Reserve Bank of New York, issue Mar, pages 33-51. [Downloadable!]
  17. Sophocles N. Brissimis & Manthos D. Delis & Nikolaos I. Papanikolaou, 2008. "Exploring the Nexus between Banking Sector Reform and Performance: Evidence from Newly Acceded EU Countries," Working Papers 73, Bank of Greece. [Downloadable!]
    Other versions:
  18. Thorsten Beck & Asli Demirguc-Kunt & Ross Levine, 2005. "Bank Concentration and Fragility: Impact and Mechanics," NBER Working Papers 11500, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  19. Gianni De Nicoló & John H. Boyd & Abu M. Jalal, 2009. "Bank Competition, Risk and Asset Allocations," IMF Working Papers 09/143, International Monetary Fund. [Downloadable!]
  20. Franklin Allen & Elena Carletti & Robert Marquez, 2009. "Credit Market Competition and Capital Regulation," Economics Working Papers ECO2009/08, European University Institute. [Downloadable!]
    Other versions:
  21. Stijn Claessens & Kenichi Ueda, 2008. "Banks and Labor as Stakeholders: Impact on Economic Performance," IMF Working Papers 08/229, International Monetary Fund. [Downloadable!]
  22. Andrea M. Maechler & Sandra Marcelino & Paulo Flavio Nacif Drummond, 2007. "Italy-Assessing Competition and Efficiency in the Banking System," IMF Working Papers 07/26, International Monetary Fund. [Downloadable!]
  23. Ramon Moreno, 2006. "The changing nature of risks facing banks," BIS Papers chapters, in: Bank for International Settlements (ed.), The banking system in emerging economies: how much progress has been made?, volume 28, pages 67-98 Bank for International Settlements. [Downloadable!]
  24. Kaniska Dam & Marc Escrihuela-Villar & Santiago Sánchez-Pagés, 2009. "On the Relationship between Market Concentration and Bank Risk Taking," DEA Working Papers 36, Universitat de les Illes Balears, Departament d'Economía Aplicada. [Downloadable!]
Statistics
Access and download statistics

Did you know? LogEc provides statistical analysis about downloads from this service (and others).

This page was last updated on 2009-11-12.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.