Bank competition and financial stability: A comparison of commercial banks and mutual savings banks in Korea
AbstractIn this study, we provide new evidence that the relationship between banking competition and financial stability varies depending on the characteristics of banks. By using a sample of two different types of banks, Korean commercial banks and mutual savings banks, we find that the non-linear relationship between competition and the stability of commercial banks reflects a trade-off between the interest effect and risk-shifting effect. However, consistent with Boyd and De Nicolo (2005), competition has a positive effect on the stability of mutual savings banks with greater business risk and weaker corporate governance. Our results provide important implications on banking competition policy.
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Bibliographic InfoArticle provided by Elsevier in its journal Pacific-Basin Finance Journal.
Volume (Year): 25 (2013)
Issue (Month): C ()
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Web page: http://www.elsevier.com/locate/pacfin
Bank competition; Stability; Risk shifting; Mutual saving banks; Commercial banks;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
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