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Bank Risk and Competition: Evidence from Regional Banking Markets

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  • Thomas Kick
  • Esteban Prieto

Abstract

We investigate the bank competition-stability nexus based on a unique regulatory dataset. First, we use outright bank defaults, and control for a wide array of different time-varying bank characteristics which are likely to influence the nexus. Second, we simultaneously include measures of competition and market power corresponding to the bank, county, and federal state level. Third, we investigate the role of bank competition in the transmission of monetary policy to bank risk. From a policy perspective, our findings indicate that competition-reducing regulation does not necessarily enhance either the stability of individual banks or their resilience to monetary policy shocks.

Suggested Citation

  • Thomas Kick & Esteban Prieto, 2015. "Bank Risk and Competition: Evidence from Regional Banking Markets," Review of Finance, European Finance Association, vol. 19(3), pages 1185-1222.
  • Handle: RePEc:oup:revfin:v:19:y:2015:i:3:p:1185-1222.
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    File URL: http://hdl.handle.net/10.1093/rof/rfu019
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Sääskilahti, Jaakko, 2016. "Local bank competition and small business lending after the onset of the financial crisis," Journal of Banking & Finance, Elsevier, vol. 69(C), pages 37-51.
    2. Fiordelisi, Franco & Mare, Davide Salvatore & Molyneux, Philip, 2015. "State-Aid, Stability and Competition in European Banking," MPRA Paper 67473, University Library of Munich, Germany.
    3. Francesco Marchionne & Alberto Zazzaro, 2018. "Risk and competitiveness in the Italian banking sector," Economics Bulletin, AccessEcon, vol. 38(1), pages 271-280.
    4. repec:eee:jbfina:v:84:y:2017:i:c:p:135-151 is not listed on IDEAS
    5. Efing, Matthias, 2015. "Arbitraging the Basel securitization framework: Evidence from German ABS investment," Discussion Papers 40/2015, Deutsche Bundesbank.
    6. Shijaku, Gerti, 2017. "Bank Stability and Competition: Evidence from Albanian Banking Market," MPRA Paper 79891, University Library of Munich, Germany.
    7. Leroy, Aurélien & Lucotte, Yannick, 2017. "Is there a competition-stability trade-off in European banking?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 46(C), pages 199-215.
    8. Kick, Thomas & Pausch, Thilo & Ruprecht, Benedikt, 2015. "The winner's curse: Evidence on the danger of aggressive credit growth in banking," Discussion Papers 32/2015, Deutsche Bundesbank.
    9. Sherrill Shaffer & Laura Spierdijk, 2019. "Measuring multi-product banks' market power using the Lerner index," CAMA Working Papers 2019-17, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    10. Kick, Thomas & Nehring, Inge & Schertler, Andrea, 2017. "Do all new brooms sweep clean? Evidence for outside bank appointments," Journal of Banking & Finance, Elsevier, vol. 84(C), pages 135-151.
    11. AAlessio Reghezza & Jonathan Williams & Alessio Bongiovanni & Riccardo Santamaria, 2019. "Do Negative Interest Rates Affect Bank Risk-Taking?," Working Papers 19012, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
    12. 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.
    13. repec:seb:journl:v:15:y:2017:i:2:p:175-208 is not listed on IDEAS
    14. Fabrizio Ferriani & Wanda Cornacchia & Paolo Farroni & Eliana Ferrara & Francesco Guarino & Francesco Pisanti, 2019. "An early warning system for less significant Italian banks," Questioni di Economia e Finanza (Occasional Papers) 480, Bank of Italy, Economic Research and International Relations Area.
    15. repec:eee:ecanpo:v:62:y:2019:i:c:p:116-130 is not listed on IDEAS
    16. repec:eee:quaeco:v:68:y:2018:i:c:p:237-253 is not listed on IDEAS

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