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Bank competition and credit risk: The case of Peru

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  • Pozo, Jorge
  • Rojas, Youel

Abstract

This paper studies empirically the relationship between competition in the loan market and credit risk in the Peruvian financial system. Our finding challenges the theoretical work of Martinez-Miera and Repullo (2010) that finds a U-shaped relationship between competition and risk-taking, as well as the empirical work of Jiménez et al. (2013) that provides evidence that supports this nonlinear relationship in a developed economy as Spain. In contrast, we find that in Peru the shape of the relationship between competition and credit risk is more complex and it depends on the competition measure.

Suggested Citation

  • Pozo, Jorge & Rojas, Youel, 2023. "Bank competition and credit risk: The case of Peru," Journal of Financial Stability, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:finsta:v:66:y:2023:i:c:s1572308923000190
    DOI: 10.1016/j.jfs.2023.101119
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    References listed on IDEAS

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    1. Georgios Chortareas & Apostolos G. Katsafados & Theodore Pelagidis & Chara Prassa, 2025. "Credit risk modelling within the euro area in the COVID‐19 period: Evidence from an ICAS framework," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 30(2), pages 1074-1105, April.

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    More about this item

    Keywords

    Competition; Credit risk; Risk-taking; Financial stability;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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