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Consolidation in banking and financial stability in Europe: Empirical evidence

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  • Uhde, André
  • Heimeshoff, Ulrich

Abstract

Using aggregate balance sheet data from banks across the EU-25 over the period from 1997 to 2005 we provide empirical evidence that national banking market concentration has a negative impact on European banks' financial soundness as measured by the Z-score technique while controlling for macroeconomic, bank-specific, regulatory, and institutional factors. Furthermore, our analysis reveals that Eastern European banking markets exhibiting a lower level of competitive pressure, fewer diversification opportunities and a higher fraction of government-owned banks are more prone to financial fragility whereas capital regulations have supported financial stability across the entire European Union.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 33 (2009)
Issue (Month): 7 (July)
Pages: 1299-1311

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Handle: RePEc:eee:jbfina:v:33:y:2009:i:7:p:1299-1311

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Keywords: Market structure Financial stability Banking regulation;

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