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Thorsten Beck, Tilburg Print
Tuesday, 22 March 2011, 14:00 - 15:15

Bank Competition and Stability: Reconciling Conflicting Empirical Evidence

Thorsten Beck, Tilburg University

Abstract: Theoretical models and empirical results offer conflicting evidence on the relationship between bank competition and bank stability. This paper aims to reconcile the seemingly contrasting evidence on the bank competition-bank soundness relationship. We develop a unified framework to assess how regulation, supervision and other institutional factors may make it more likely that the data favor one theory over the other (charter value paradigm versus risk-shifting paradigm). Cross-country heterogeneity in these factors allows us to test the assumptions and predictions of various theoretical models. We show that an increase in competition will have a larger impact on banks’ risk taking incentives in countries with stricter activity restrictions, more herding in revenue structure and unconcentrated banking markets.
Location: R 42.2.113
Contact: Claude Adan, This e-mail address is being protected from spam bots, you need JavaScript enabled to view it