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Banking competition and financial fragility: Evidence from panel-data

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  • Ruiz-Porras, Antonio

Abstract

We study how banking competition may affect the stability of banking systems. We develop our study by expanding the failure-determinant methodology to include panel-data techniques and by controlling the effects of financial structure and development. 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 fragility.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 5673.

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Date of creation: 29 Oct 2007
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Handle: RePEc:pra:mprapa:5673

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Keywords: Banks; competition; fragility; financial systems;

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  1. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2003. "Bank concentration and crises," Policy Research Working Paper Series 3041, The World Bank.
  2. Norman Loayza & Romain Rancière, 2004. "Financial development, financial fragility and growth," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 855, Department of Economics and Business, Universitat Pompeu Fabra.
  3. Demirguc-Kunt, Asli & Detragiache, Enrica, 2005. "Cross-country empirical studies of systemic bank distress : a survey," Policy Research Working Paper Series 3719, The World Bank.
  4. Rolnick, Arthur J & Weber, Warren E, 1983. "New Evidence on the Free Banking Era," American Economic Review, American Economic Association, American Economic Association, vol. 73(5), pages 1080-91, December.
  5. Demirguc-Kunt, Asli & Huizinga, Harry, 2000. "Financial structure and bank profitability," Policy Research Working Paper Series 2430, The World Bank.
  6. Franklin Allen, 2001. "Financial Structure and Financial Crisis," International Review of Finance, International Review of Finance Ltd., International Review of Finance Ltd., vol. 2(1&2), pages 1-19.
  7. Dowd, Kevin, 1996. "The Case for Financial Laissez-Faire," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 106(436), pages 679-87, May.
  8. 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.
  9. Ruiz-Porras, Antonio, 2006. "Financial systems and banking crises: An assessment," MPRA Paper 168, University Library of Munich, Germany.
  10. 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, El Colegio de México, Centro de Estudios Económicos, vol. 21(1), pages 55-84.
  11. Caminal, Ramon & Matutes, Carmen, 2002. "Market power and banking failures," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 20(9), pages 1341-1361, November.
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Cited by:
  1. Bretschger, Lucas & Kappel, Vivien & Werner, Therese, 2012. "Market concentration and the likelihood of financial crises," Journal of Banking & Finance, Elsevier, Elsevier, vol. 36(12), pages 3336-3345.
  2. Ruiz-Porras, Antonio, 2008. "Financial structure, financial development and banking fragility: International evidence," MPRA Paper 12124, University Library of Munich, Germany.
  3. 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.

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