Work

Does Competition Affect Bank Risk?

Year: 2017

Type: report

Abstract: Although policymakers often discuss tradeoffs between bank competition and stability, past research provides differing theoretical perspectives and empirical results on the impact of competition on risk.In this paper, we employ a new approach for identifying exogenous changes in the competitive pressures facing individual banks and discover that an intensification of competition materially boosts bank risk.With respect to the mechanisms, we find that competition reduces bank profits, charter values, and relationship lending and increases banks' provision of nontraditional banking services.

Source: National Bureau of Economic Research

DOI: 10.3386/w23080

Authors: Liangliang Jiang, Ross Levine, Chen Lin

Institutions: University of Geneva, University of London, National Bureau of Economic Research, Hong Kong Polytechnic University, Geneva Finance Research Institute, London Business School, University of Amsterdam, University of Hong Kong, University of California, Berkeley, University of Edinburgh

Language: English

Topic: Banking stability, regulation, efficiency

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2509769772

Cites: 81

Cited by: 27

Related to: 10