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Does Banking Competition Enhance or Mitigate Risk? New Evidence from OECD Countries

Author

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  • Özlem Karadağ Ak
  • Şenol Babuşçu
  • Adalet Hazar

Abstract

The primary aim of the study is to question the relationship between competition and risk-taking behavior in banks in recent years, when competition and risks have significantly differentiated, and to provide new evidence. In addition, it is also aimed to question the impact of the level of financial development on the relationship between competition and risk. In this context, the study is the first of its kind in the literature. A comprehensive study was conducted with the data of 6,478 banks operating in OECD (Organization for Economic Co-operation and Development) member countries for the period 2013-2021. Panel data analysis results obtained from the nexus between competition and risk-taking behavior are found to be consistent with the ‘Competition-stability’ view. The results are also consistent with the ‘Non-linear’ view, revealing a non-linear relationship between competition and risk-taking behavior, which is formed according to banks' actions by the position they have taken according to the situation of the sector.

Suggested Citation

  • Özlem Karadağ Ak & Şenol Babuşçu & Adalet Hazar, 2025. "Does Banking Competition Enhance or Mitigate Risk? New Evidence from OECD Countries," Journal of Research in Economics, Politics & Finance, Ersan ERSOY, vol. 10(3), pages 926-948.
    • Handle: RePEc:ahs:journl:v:10:y:2025:i:3:p:926-948
    DOI: 10.30784/epfad.1695468
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    References listed on IDEAS

    as
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    Keywords

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    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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