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Geographical spillovers on the relation between risk-taking and market power in the US banking sector

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  • Pino, Gabriel
  • Herrera, Rodrigo
  • Rodríguez, Alejandro

Abstract

This paper investigates the relation between risk taking and market power in the US banking sector by introducing the effect of geographical spillovers caused by the transmission of risk taking among banks. For this purpose, we use spatial econometrics. Our results support a negative relation between risk taking and market power. The transmission of risk taking causes significant geographical spillovers, which increases the magnitude of the relation under analysis here. Moreover, the spillover effect is found to be stronger during the Subprime-crisis period when we noted an increased in the transmission of risk taking of banks.

Suggested Citation

  • Pino, Gabriel & Herrera, Rodrigo & Rodríguez, Alejandro, 2019. "Geographical spillovers on the relation between risk-taking and market power in the US banking sector," The North American Journal of Economics and Finance, Elsevier, vol. 47(C), pages 351-364.
  • Handle: RePEc:eee:ecofin:v:47:y:2019:i:c:p:351-364
    DOI: 10.1016/j.najef.2018.05.005
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    More about this item

    Keywords

    Transmission; Risk taking; Market power; Spatial autoregressive model;
    All these keywords.

    JEL classification:

    • 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
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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