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Bank competition, concentration and financial stability in the Turkish banking industry

Author

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  • Kasman, Saadet
  • Kasman, Adnan

Abstract

This paper analyzes the impact of competition and concentration on bank stability in the Turkish banking industry over the period 2002–2012. The Boone indicator and the efficiency-adjusted Lerner index are used as proxies for competition, while the non-performing loans (NPL) ratio and Z-scores are used as proxies for bank stability. The main results indicate that competition is negatively related to the NPL ratio but positively related to the Z-score. The results further indicate that greater concentration has a positive impact on the NPL and a negative impact on the Z-score. We also use a quadratic term of the competition measures to capture a possible non-linear relationship between competition and stability. The results show that the coefficient of the quadratic term is negative for the NPL model and positive for the Z-score model. Overall, our findings provide support for the competition-fragility view.

Suggested Citation

  • Kasman, Saadet & Kasman, Adnan, 2015. "Bank competition, concentration and financial stability in the Turkish banking industry," Economic Systems, Elsevier, vol. 39(3), pages 502-517.
  • Handle: RePEc:eee:ecosys:v:39:y:2015:i:3:p:502-517
    DOI: 10.1016/j.ecosys.2014.12.003
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    References listed on IDEAS

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    Cited by:

    1. M. Brei & L. Jacolin & A. Noah, 2018. "Credit risk and bank competition in Sub-Saharan Africa," Working papers 664, Banque de France.
    2. Samangi Bandaranayake & Kuntal Das & W. Robert Reed, 2017. "A Replication of “Are Competitive Banking Systems More Stable?” (Journal of Money, Credit, and Banking, 2009)," Working Papers in Economics 17/01, University of Canterbury, Department of Economics and Finance.
    3. repec:eee:ecofin:v:46:y:2018:i:c:p:49-69 is not listed on IDEAS
    4. Samangi Bandaranayake & Kuntal K. Das & W. Robert Reed, 2018. "A Replication of “Bank Competition and Financial Stability: Much Ado About Nothing?” (Journal of Economic Surveys, 2016)," Working Papers in Economics 18/18, University of Canterbury, Department of Economics and Finance.
    5. repec:taf:intecj:v:31:y:2017:i:4:p:578-598 is not listed on IDEAS
    6. repec:cuf:journl:y:2018:v:19:i:1:liu:huang:li is not listed on IDEAS
    7. repec:eee:ememar:v:38:y:2019:i:c:p:310-325 is not listed on IDEAS
    8. repec:eee:pacfin:v:48:y:2018:i:c:p:144-161 is not listed on IDEAS
    9. repec:eee:ecosys:v:43:y:2019:i:1:p:111-129 is not listed on IDEAS
    10. repec:eee:jebusi:v:96:y:2018:i:c:p:15-41 is not listed on IDEAS
    11. repec:eee:riibaf:v:41:y:2017:i:c:p:260-279 is not listed on IDEAS

    More about this item

    Keywords

    Financial stability; Bank competition; Lerner index; Boone indicator; Turkish banking;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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