Bank competition and financial stability in Asia Pacific

Does Concentration Matter for Bank Stability? Evidence from the Albanian Banking Sector

“…The magnitude of the parameter suggests that bank stability improves by nearly 1.260pp in response of a 1pp positive shock on output. Our results also corroborate findings by Fu, et al, (2014). This means that the performance of economic activity play relatively a crucial role for bank stability behaviour and at the same time banks place arelative consider manner to the economic conditions in which they operate, since an upward movements in economic activity would improve the situation of the banking system through a higher financial intermediation or for low risks related to bank sovereignty risks 9 .…”

“…Similarly, despite accommodating policies by Bank of Albania to lower market concentration, still tendency towards a more concentrated market is found to be associated or even foreheads banking system fragility (See also Graph 1 in Appendix). Unlike the US and European counterparts, and similar to the Asia Pacific banking industry [Fu, et al, (2014)], the Albanian banking system emerged from the GFC in a relatively stable position without requiring anywhere near the same degree of government support and bailouts. These patterns make it a particularly interesting environment for studying the concentration-stability nexus in banking.…”

“…Nor do we use data from the Bankscope database. Moreover, different from previous empirical work, this paper neither focuses on real episodes of banking crises nor uses binary approach as a proxy for instability episodes, or uses the Z-score or credit risk as an in-variant measure of the bank's risk-taking behaviour and distance to solvency, to which Fu, et al, (2014) instead a more sophisticated proxy for bank stability that is based on a wide set of consolidated balance sheet data and the principal component analyses approach as explained by Shijaku (2016). The other contribution of this paper is that it also extends and enhances previous findings by using instrument variables regressed to address likely reverse causality due to probable two-sided relationship between concentration and bank stability.…”

Competitive Condition of Sub-Saharan Africa Commercial Banks

“…An extensive body of theoretical and empirical studies has reported the significant role of bank competition in ensuring access to finance (Clarke et al, 2006;Lin et al, 2010;Love and Per´ıa, 2014;Mudd, 2013;Rice and Strahan, 2010;Tan, 2013), efficiency (Mlambo and Ncube, 2011;Ningaye et al, 2014;Pasiouras et al, 2009;PruteanuPodpiera et al, 2008) and stability Fu et al, 2014;Schaeck and Cih´ak, 2014;Ariss, 2010) in any economy. According to Casu et al (2015), competition is good for many reasons; it is an essential force in any economy, it encourages firms to be more efficient and provide better allocation of resources.…”

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“…Mirzaei et al (2013) pointed out that managerial inefficiency in a concentrated banking market triggers high operational risk. Similarly, Fu et al (2014) empirically analyzed the link between concentration and financial fragility, by utilizing a dataset of 14 Asian Pacific countries.…”