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Banking Competition and Financial Fragility: Evidence from Panel-Data

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  • Antonio Ruiz-Porras

    (Instituto Tecnológico y de Estudios Superiores de Monterrey)

Abstract

We study how competition may affect the stability of banking systems. We modify the failure-determinant methodology to include panel-data techniques. We use indicators for 47 countries between 1990 and 1997. The main findings show that banking concentration and foreign ownership are associated to bank-based financial systems and financial underdevelopment. They also show that banking credit and bank-based financial systems enhance banking fragility. Banking concentration is not a significant determinant. Furthermore our findings suggest that financial structure and, maybe, the property regime matter to assess such fragility.

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Bibliographic Info

Article provided by El Colegio de México, Centro de Estudios Económicos in its journal Estudios Económicos.

Volume (Year): 23 (2008)
Issue (Month): 1 ()
Pages: 49-87

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Handle: RePEc:emx:esteco:v:23:y:2008:i:1:p:49-87

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Web page: http://www.colmex.mx/centros/cee/
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Keywords: banks; competition; fragility; financial systems.;

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  1. Asli Demirgüç-Kunt & Enrica Detragiache, 2005. "Cross-Country Empirical Studies of Systemic Bank Distress: A Survey," National Institute Economic Review, National Institute of Economic and Social Research, vol. 192(1), pages 68-83, April.
  2. Dowd, Kevin, 1996. "The Case for Financial Laissez-Faire," Economic Journal, Royal Economic Society, vol. 106(436), pages 679-87, May.
  3. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2003. "Bank concentration and crises," Policy Research Working Paper Series 3041, The World Bank.
  4. Ruiz-Porras, Antonio, 2006. "Financial systems and banking crises: An assessment," MPRA Paper 168, University Library of Munich, Germany.
  5. Caminal, Ramon & Matutes, Carmen, 2002. "Market power and banking failures," International Journal of Industrial Organization, Elsevier, vol. 20(9), pages 1341-1361, November.
  6. Norman Loayza & Romain Ranciere, 2002. "Financial Development, Financial Fragility, and Growth," CESifo Working Paper Series 684, CESifo Group Munich.
  7. Rolnick, Arthur J & Weber, Warren E, 1983. "New Evidence on the Free Banking Era," American Economic Review, American Economic Association, vol. 73(5), pages 1080-91, December.
  8. Kaniska Dam & Susana Wendy Zendejas Castillo, 2006. "Market power and risk taking behavior of banks," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 21(1), pages 55-84.
  9. Demirguc-Kunt, Asli & Huizinga, Harry, 2000. "Financial structure and bank profitability," Policy Research Working Paper Series 2430, The World Bank.
  10. Franklin Allen, 2001. "Financial Structure and Financial Crisis," International Review of Finance, International Review of Finance Ltd., vol. 2(1&2), pages 1-19.
  11. Daniel C. Hardy & Ceyla Pazarbasioglu, 1999. "Determinants and Leading Indicators of Banking Crises: Further Evidence," IMF Staff Papers, Palgrave Macmillan, vol. 46(3), pages 1.
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Cited by:
  1. Lucas Bretschger & Vivien Kappel, 2010. "Market concentration and the likelihood of financial crises," CER-ETH Economics working paper series 10/138, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  2. Ruiz-Porras, Antonio, 2012. "La investigación econométrica mediante paneles de datos: Historia, modelos y usos en México
    [Econometric research with panel data: History, models and uses in Mexico]
    ," MPRA Paper 42909, University Library of Munich, Germany.
  3. Ruiz-Porras, Antonio, 2008. "Financial structure, financial development and banking fragility: International evidence," MPRA Paper 12124, University Library of Munich, Germany.

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