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Risk and competitiveness in the Italian banking sector

Author

Listed:
  • Francesco Marchionne

    (Indiana University)

  • Alberto Zazzaro

    (University of Naples Federico II; CSEF & MoFiR (Italy))

Abstract

In this paper, we analyse the relationship between risk and competition in the Italian banking sector over the period from 2006 to 2010. We employ OLS and panel estimators to estimate the impact of the Lerner index, a measure of bank market power, on the Altman Z-score, a proxy of the insolvency probability. Our results are consistent with the traditional charter value paradigm and reject the new risk-shifting paradigm proposed by Boyd-De Nicolo' (2005). We find that the relationship between bank risk and competition becomes more tightening during the financial crisis. Our results are robust to different definitions of crisis and different specifications.

Suggested Citation

  • Francesco Marchionne & Alberto Zazzaro, 2018. "Risk and competitiveness in the Italian banking sector," Mo.Fi.R. Working Papers 147, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  • Handle: RePEc:anc:wmofir:147
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    Cited by:

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    2. Francesco Marchionne & Beniamino Pisicoli & Michele Fratianni, 2017. "Regulation, financial crises, and liberalization traps," Mo.Fi.R. Working Papers 143, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    3. Rakan Fuad Aldomy & Chan Kok Thim & Nguyen Thi Phuong Lan & Mariati Binti Norhashim, 2020. "Bank Concentration and Financial Risk in Jordan," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 16(3), pages 31-44.

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    More about this item

    Keywords

    bank; competition; stability; financial crisis;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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