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Competition-Stability Relationship In Dual Banking Systems: Evidence From Efficiency-Adjusted Market Power

Author

Listed:
  • MUDEER AHMED KHATTAK

    (Faculty of Business Administration, Iqra University Islamabad, Pakistan)

  • OMAR ALAEDDIN

    (Universiti Kuala Lumpur, Business School, Universiti Kuala Lumpur, Malaysia)

  • MOUTAZ ABOJEIB

    (Islamic Shariah Research Acadamy (ISRA), Malaysia)

Abstract

This research attempts to explore the impact of banking competition on financial stability employing a more precise measure of market power. It was found that Islamic banks are less stable and are enjoying lower market power. The analysis shows that higher market competition makes the banking sector vulnerable to defaults, supporting the “competition-fragility view†. This research finds no difference in the relationship for Islamic banks indicates that Islamic banks might be involved in traditional banking activities as conventional banks. The results are consistent and robust to different estimation approaches and subsamples. This research carries regulatory and policy implications.

Suggested Citation

  • Mudeer Ahmed Khattak & Omar Alaeddin & Moutaz Abojeib, 2022. "Competition-Stability Relationship In Dual Banking Systems: Evidence From Efficiency-Adjusted Market Power," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 67(01), pages 309-332, March.
    • Handle: RePEc:wsi:serxxx:v:67:y:2022:i:01:n:s0217590820420096
    DOI: 10.1142/S0217590820420096
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    Cited by:

    1. Wajahat Azmi & Zaheer Anwer & Mohsin Ali & Shamsher Mohamad, 2024. "Competition, stability, and institutional environment: The case of dual banking economies," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(1), pages 609-631, January.

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