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Market power and the risk-taking of banks: Some semiparametric evidence from emerging economies

Author

Listed:
  • Bang Nam Jeon

    (Drexel University)

  • Ji Wu

    (Southwestern University of Finance and Economics)

  • Mengmeng Guo

    (Southwestern University of Finance and Economics)

  • Minghua Chen

    (Southwestern University of Finance and Economics)

Abstract

We investigate the nexus between the market power of banks and their risk-taking, using bank-level data from 35 emerging economies during the period of 2000-2014. Under a Bayesian framework, we employ the semiparametric method, which allows for a nonlinear risk impact of banks' market power. Our results suggest a significant nonlinear relationship between the market power and the risk-taking of banks.

Suggested Citation

  • Bang Nam Jeon & Ji Wu & Mengmeng Guo & Minghua Chen, 2018. "Market power and the risk-taking of banks: Some semiparametric evidence from emerging economies," School of Economics Working Paper Series 2018-1, LeBow College of Business, Drexel University.
    • Handle: RePEc:ris:drxlwp:2018_001
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    Cited by:

    1. Bang Nam Jeon & Ji Wu & Limei Chen & Minghua Chen, 2020. "Diversification, efficiency and risk of banks: New consolidating evidence from emerging economies," School of Economics Working Paper Series 2020-10, LeBow College of Business, Drexel University.
    2. Whelsy Boungou, 2019. "Negative Interest Rates, Bank Profitability and Risk-taking," Working Papers hal-03456106, HAL.
    3. Matabaro Borauzima, Luc & Muller, Aline, 2023. "Bank risk-taking and competition in developing banking markets: Does efficiency level matter? Evidence from Africa," Emerging Markets Review, Elsevier, vol. 55(C).
    4. Tiago M. Dutra & João C. A. Teixeira & José Carlos Dias, 2024. "The effect of political institutions on the interplay between banking regulation and banks’ risk," Journal of Banking Regulation, Palgrave Macmillan, vol. 25(2), pages 179-196, June.
    5. Sulong, Zunaidah & Fuszder, Md. Habibur Rahman & Abdullah, Mohammad & Abakah, Emmanuel Joel Aikins, 2025. "Cybersecurity risk and bank risk-taking," Journal of Behavioral and Experimental Finance, Elsevier, vol. 47(C).
    6. Dutra, Tiago M. & Teixeira, João C.A. & Dias, José Carlos, 2023. "Banking regulation and banks’ risk-taking behavior: The role of investors’ protection," The Quarterly Review of Economics and Finance, Elsevier, vol. 90(C), pages 124-148.
    7. Wu, Ji & Chen, Limei & Chen, Minghua & Jeon, Bang Nam, 2020. "Diversification, efficiency and risk of banks: Evidence from emerging economies," Emerging Markets Review, Elsevier, vol. 45(C).
    8. Chen, Minghua & Kang, Qiaoling & Wu, Ji & Jeon, Bang Nam, 2022. "Do macroprudential policies affect bank efficiency? Evidence from emerging economies," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 77(C).
    9. Khan, Mohammad Azeem & Ahmad, Wasim, 2022. "Fresh evidence on the relationship between market power and default risk of Indian banks," Finance Research Letters, Elsevier, vol. 46(PA).

    More about this item

    Keywords

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    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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