Intricacies of competition, stability, and diversification: Evidence from dual banking economies

Azmi, Wajahat; Ali, Mohsin; Arshad, Shaista; Rizvi, Syed Aun R.

doi:10.1016/j.econmod.2019.02.002

Cited by 60 publications

(58 citation statements)

References 48 publications

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“…In Table 3, model (1-3) explains the effect of bank competition on NPLs. Similarly, model (4)(5)(6) shows the results of the competition on the bank's capitalization ratio and model (7)(8)(9) exhibits the impact of competition on Z-index. All the models include Lerner index, HHI-deposits index, or HHI-loan index as inverse measures of bank competition.…”

Section: Competition and Stability Resultsmentioning

confidence: 99%

Does Bank Competition Enhance or Hinder Financial Stability? Evidence from Indian Banking

Rakshit

Bardhan

2020

Journal of Central Banking Theory and Practice

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The primary purpose of this paper is to empirically investigate the impact of bank competition on financial stability in India. We use a dynamic panel model to examine whether an increase in bank competition hindrances financial stability of commercial banks in India over the period 1996 to 2016. Findings reveal that in India, a higher degree of bank competition is positively associated with the prevalence of non-performing loans. Additionally, the positive impact of the Lerner index on Z-score lends support to competition-fragility hypothesis. However, we argue that both the views of competition-stability and competition-fragility can coexist in a single banking system like India.

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Section: Competition and Stability Resultsmentioning

confidence: 99%

Does Bank Competition Enhance or Hinder Financial Stability? Evidence from Indian Banking

Rakshit

Bardhan

2020

Journal of Central Banking Theory and Practice

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“…On the other hand, high inflation might mean a riskier market where banks charge higher lending rates to cover for the risk. Because the period of the data includes the crisis period of 2008–2009, Crisis is a dummy variable added to the model to control crisis effects, which takes a value of 1 for the year 2008–2009 and 0 otherwise (Azmi, Ali, Arshad, & Rizvi, 2019; Ibrahim & Rizvi, 2017). Table 1 presents the variable symbols, definitions, expected signs, and the sources.…”

Section: Data and Econometric Modelingmentioning

confidence: 99%

Banks' environmental policy and business outcomes: The role of competition

Khattak

Saiti

2020

Bus Strat Env

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By integrating the two areas of competition–performance and environment–performance, this research explores if competition matters in the relationship between environmental practices and interest margins in the market. A panel of 458 banks from 74 countries for the period of 2006–2016 is used, and the sample is further divided into developed and developing countries. This paper uses the system Generalized Method of Moments estimator to tackle potential omitted variable bias, endogeneity, and simultaneity issues. Without competition, environmental practices only affect banks in developing countries; however, the results show a significant impact for the full sample, including developed countries, when the competition is taken into consideration, suggesting that competition might play a role in the relationship of environmental practices and interest margins. In the full sample, competition impacts the relationship negatively after a moderate level of competition is reached in the market. The environmental practices in developing countries are prone to competition in the market. In developed countries, the competition is found to be lightly positively moderating the impact of environmental practices on interest margins. Based on these findings, it is recommended that developing countries should have a low or moderate level of competition to encourage environmental practices. For developed countries, however, high competition should be preferred to encourage banks to consider environmental practices as one of their core business strategies. These findings are found robust to different statistical estimators.

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“…Some studies broadly find that competition improves bank stability in the US, the Commonwealth of Independent States (CIS), and 14 Asia-Pacific countries ( Clark et al, 2018 ; Fu et al, 2014 ; Goetz, 2018 ) . However, other studies find that more competition instead negatively affects bank stability in the Middle East and North African (MENA) countries and other economies where both Islamic and conventional banks work alongside each other ( Albaity, Mallek, & Noman, 2019 ; Azmi, Ali, Arshad, & Rizvi, 2019 ). Overall, this brief literature review shows that researchers have found different reasons for the risk-taking by banks and their financial instability, but they are not adequately clear about the underlying reasons behind the problem: Why and how a bank takes on excess risk and falls into financial instability.…”

Section: Literature and Hypothesismentioning

confidence: 99%