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The impact of market power of Russian banks on their credit risk tolerance: A panel study

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Listed author(s):
  • Mamonov, Mikhail

    ()

    (The Center for Macroeconomic Analysis and Short-term Forecasting (CMASF); National Research University Higher School of Economics, Moscow.)

Abstract

The article presents an empirical analysis of the interaction between market power of Russian banks and their resistance to credit risk during 2004Q1–2011Q2. We employ individual concentration index of banks in different asset markets (structural measure) and the Lerner index (unstructured measure) as indicators of market power. We approximate banks’ credit risks by the share of overdue loans in total loans — an indicator of loan portfolios quality within the Russian Accounting Standards (RAS). The main result implies that increases of market power leads to considerable improvements of the loan portfolio quality of banks, especially large ones, since the intensive development of the credit market allows banks to filter out low-quality borrowers. Moreover, we found empirically the threshold separating the negative and positive effects of competition on credit risk. Since more than 90% of Russian banks are below this threshold in the current macroeconomic environment we reject «competition–stability» hypothesis.

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File URL: http://pe.cemi.rssi.ru/pe_2012_4_85-112.pdf
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Article provided by Publishing House "SINERGIA PRESS" in its journal Applied Econometrics.

Volume (Year): 28 (2012)
Issue (Month): 4 ()
Pages: 85-112

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Handle: RePEc:ris:apltrx:0197
Contact details of provider: Web page: http://appliedeconometrics.cemi.rssi.ru/

Keywords: competition; market power; Lerner index; Herfindahl–Hirschman index; credit risk; quality of loan portfolios.;

Find related papers by JEL classification:

  • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
  • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
  • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
  • 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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Cited by:

  1. repec:nea:journl:y:2017i:33:p:44-74 is not listed on IDEAS
  2. Georgios P. Kouretas & Chris Tsoumas, 2013. "Bank Risk-Taking in CEE Countries," Central European Journal of Economic Modelling and Econometrics, CEJEME, vol. 5(2), pages 103-123, June.
  3. Bakaykina, Anna, 2015. "The estimation of the competitiveness of SME financing programs of development banks in Russia," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 40(4), pages 106-128.
  4. Mamonov, Mikhail, 2015. "Microeconomic modification of an industry-wide Boone indicator: Market power of Russian banks revisited," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 18-44.
  5. Georgios Kouretas & Chris Tsoumas & Anastasios A. Drakos, 2013. "Ownership, institutions and bank risk-taking in Central and Eastern European countries," EcoMod2013 5204, EcoMod.

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