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Vertical Differentiation, Risk-Taking and Retail Funding

Author

Listed:
  • David Jaume

    (Banco de México)

  • Martin Tobal

    (Banco de México)

  • Renato Yslas

    (Banco de México)

Abstract

Results of previous studies of the relationship between bank competition and bank risk-taking have differed in findings but most have used the same sort of barriers to perfect competition, such as entry barriers and differences in bank default risk. This study suggests that banks that compete more effectively in the deposit market using nonprice features such as differences in services and advertising gain market power and such market power gives them incentives to take less risk. Banks that compete less effectively take more risk. Empirical evidence supports the predictions of the model.

Suggested Citation

  • David Jaume & Martin Tobal & Renato Yslas, 2023. "Vertical Differentiation, Risk-Taking and Retail Funding," Journal of Financial Services Research, Springer;Western Finance Association, vol. 64(1), pages 133-153, August.
    • Handle: RePEc:kap:jfsres:v:64:y:2023:i:1:d:10.1007_s10693-022-00391-2
    DOI: 10.1007/s10693-022-00391-2
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    References listed on IDEAS

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    More about this item

    Keywords

    Risk taking; Vertical Differentiation; Deposits;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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