Does competition influence bank failures?
There has been a notable debate in the banking literature on the impact of bank competition on financial stability. While the dominant view sees a detrimental impact of competition on the stability of banks, this view has recently been challenged by Boyd and De Nicolo (2005) who see the reverse effect. The aim of this paper is to contribute to this literature by providing the first empirical investigation of the role of bank competition on the occurrence of bank failures. We analyze this issue based on a large sample of Russian banks over the period 2001-2007 and in line with the previous literature we employ the Lerner index as the metric of bank competition. Our findings clearly support the view that tighter bank competition enhances the occurrence of bank failures. The normative implication of our findings is therefore that measures that increase bank competition could undermine financial stability.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 21 (2013)
Issue (Month): 2 (04)
|Contact details of provider:|| Postal: One Exchange Square, London EC2A 2JN|
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0967-0750
More information through EDIRC
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=0967-0750|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Matutes, Carmen & Vives, Xavier, 1995.
"Imperfect Competition, Risk Taking, and Regulation in Banking,"
CEPR Discussion Papers
1177, C.E.P.R. Discussion Papers.
- Matutes, Carmen & Vives, Xavier, 2000. "Imperfect competition, risk taking, and regulation in banking," European Economic Review, Elsevier, vol. 44(1), pages 1-34, January.
- Gianni De Nicolo & Elena Loukoianova, 2007.
"Bank Ownership, Market Structure and Risk,"
IMF Working Papers
07/215, International Monetary Fund.
- A. Karas & W. Pyle & K. Schoors, 2007.
"Sophisticated Discipline in a Nascent Deposit Market: Evidence from Post-Communist Russia,"
Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium
07/450, Ghent University, Faculty of Economics and Business Administration.
- Karas, Alexei & Pyle, William & Schoors, Koen, 2006. "Sophisticated discipline in a nascent deposit market: Evidence from post-communist Russia," BOFIT Discussion Papers 13/2006, Bank of Finland, Institute for Economies in Transition.
- Karas, Alexei & Pyle, William & Schoors, Koen, 2006. "Sophisticated discipline in a nascent deposit market : evidence from post-communist Russia," BOFIT Discussion Papers 13/2006, Bank of Finland, Institute for Economies in Transition.
- Maudos, Joaquin & Fernandez de Guevara, Juan, 2006. "The cost of market power in banking: social welfare loss vs. inefficiency cost," MPRA Paper 15253, University Library of Munich, Germany.
- David C. Wheelock & Paul W. Wilson, 1995.
"Why do banks disappear? The determinants of U.S. bank failures and acquisitions,"
1995-013, Federal Reserve Bank of St. Louis.
- David C. Wheelock & Paul W. Wilson, 2000. "Why do Banks Disappear? The Determinants of U.S. Bank Failures and Acquisitions," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 127-138, February.
- Gabriel Jiménez & Jose A. Lopez & Jesús Saurina, 2007.
"How does competition impact bank risk-taking?,"
Working Paper Series
2007-23, Federal Reserve Bank of San Francisco.
- Claeys, Sophie & Schoors, Koen, 2007.
"Bank supervision Russian style: Evidence of conflicts between micro- and macroprudential concerns,"
Working Paper Series
205, Sveriges Riksbank (Central Bank of Sweden).
- Claeys, Sophie & Schoors, Koen, 2007. "Bank supervision Russian style: Evidence of conflicts between micro- and macro-prudential concerns," Journal of Comparative Economics, Elsevier, vol. 35(3), pages 630-657, September.
- Arena, Marco, 2008.
"Bank failures and bank fundamentals: A comparative analysis of Latin America and East Asia during the nineties using bank-level data,"
Journal of Banking & Finance,
Elsevier, vol. 32(2), pages 299-310, February.
- Marco Arena, 2005. "Bank Failures and Bank Fundamentals: A Comparative Analysis of Latin America and East Asia during the Nineties using Bank-Level Data," Staff Working Papers 05-19, Bank of Canada.
- Peresetsky, Anatoly A. & Karminsky, Alexandr A. & Golovan, Sergei V., 2004.
"Probability of default models of Russian banks,"
BOFIT Discussion Papers
21/2004, Bank of Finland, Institute for Economies in Transition.
- Carbo, Santiago & Humphrey, David & Maudos, Joaquin & Molyneux, Philip, 2006.
"Cross-Country Comparisons of Competition and Pricing Power in European Banking,"
15258, University Library of Munich, Germany, revised 2006.
- Carbó, Santiago & Humphrey, David & Maudos, Joaquín & Molyneux, Philip, 2009. "Cross-country comparisons of competition and pricing power in European banking," Journal of International Money and Finance, Elsevier, vol. 28(1), pages 115-134, February.
- Santiago Carbó Valverde & David B. Humphrey & Joaquin Maudos & Philip Molyneux, 2006. "Cross-country comparisons of competition and pricing power in European banking," Proceedings 1107, Federal Reserve Bank of Chicago.
- Humphrey David & Carbó Valverde Santiago & Maudos Villarroya Joaquín & Molyneux Philip, 2006. "Cross-Country Comparisons of Competition and Pricing Power in European Banking," Working Papers 201036, Fundacion BBVA / BBVA Foundation.
- Francisco Pérez García & Joaquín Maudos Villarroya & Juan Francisco Fernández de Guevara Radoselovics, 2002.
"Market Power In European Banking Sectors,"
Working Papers. Serie EC
2002-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- Martinez-Miera, David & Repullo, Rafael, 2008.
"Does Competition Reduce the Risk of Bank Failure?,"
CEPR Discussion Papers
6669, C.E.P.R. Discussion Papers.
- Glushkova, Ekaterina & Vernikov, Andrei, 2009. "How big is the visible hand of the state in the Russian banking industry?," MPRA Paper 15563, University Library of Munich, Germany.
- Martin Cihak & Simon Wolfe & Klaus Schaeck, 2006. "Are More Competitive Banking Systems More Stable?," IMF Working Papers 06/143, International Monetary Fund.
- Gianni De Nicolo & Abu M. Jalal & John H. Boyd, 2006. "Bank Risk-Taking and Competition Revisited; New Theory and New Evidence," IMF Working Papers 06/297, International Monetary Fund.
- Maudos, Joaquin & de Guevara, Juan Fernandez, 2007. "The cost of market power in banking: Social welfare loss vs. cost inefficiency," Journal of Banking & Finance, Elsevier, vol. 31(7), pages 2103-2125, July.
- Camara, Modibo K. & Montes-Negret, Fernando, 2006. "Deposit insurance and banking reform in Russia," Policy Research Working Paper Series 4056, The World Bank.
- Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2006. "Bank concentration, competition, and crises: First results," Journal of Banking & Finance, Elsevier, vol. 30(5), pages 1581-1603, May.
- John H. Boyd & Gianni De Nicolã, 2005. "The Theory of Bank Risk Taking and Competition Revisited," Journal of Finance, American Finance Association, vol. 60(3), pages 1329-1343, 06.
- Keeley, Michael C, 1990. "Deposit Insurance, Risk, and Market Power in Banking," American Economic Review, American Economic Association, vol. 80(5), pages 1183-1200, December.
- Solís, Liliana & Maudos, Joaquín, 2008. "The social costs of bank market power: Evidence from Mexico," Journal of Comparative Economics, Elsevier, vol. 36(3), pages 467-488, September.
- Berger, Allen N. & Klapper, Leora F. & Turk-Ariss, Rima, 2008.
"Bank competition and financial stability,"
Policy Research Working Paper Series
4696, The World Bank.
- Männasoo, Kadri & Mayes, David G., 2009. "Explaining bank distress in Eastern European transition economies," Journal of Banking & Finance, Elsevier, vol. 33(2), pages 244-253, February.
- Caminal, Ramon & Matutes, Carmen, 2002. "Market power and banking failures," International Journal of Industrial Organization, Elsevier, vol. 20(9), pages 1341-1361, November.
- Styrin Konstantin, 2005. "X-inefficiency, Moral Hazard, and Bank Failures," EERC Working Paper Series 01-258e-2, EERC Research Network, Russia and CIS.
- Ece Ungan & Selçuk Caner & Süheyla Özyıldırım, 2008. "Depositors’ Assessment of Bank Riskiness in the Russian Federation," Journal of Financial Services Research, Springer;Western Finance Association, vol. 33(2), pages 77-100, April.
When requesting a correction, please mention this item's handle: RePEc:bla:etrans:v:21:y:2013:i:2:p:301-322. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.