Bank development, competition, and entrepreneurship: International evidence
توسعه بانک ، رقابت و کارآفرینی: شواهد بین المللی-2020
This paper uses a panel database for 84 countries over the 2002–2017 period to analyze the importance of bank development and bank market competition for enhancing new business creation. The results show that less bank market competition facilitates the creation of new businesses. Bank development, however, is not associated with a higher entry rate of new businesses. Less bank market competition and lending relationships appear to be a main channel for reducing the cost of debt and overcoming traditional adverse selection and moral hazard problems between banks and newly created firms. The global financial crisis did not modify the positive effect of less bank market competition on new firm registration. The results are robust to controls for equity market development, the ability of banks to hold equity positions in nonfinancial firms, the costs and days required for starting a business, and any other omitted time-invariant variables at country level.
Keywords: Entrepreneurship | Bank development | Bank competition | Bank crisis
Foreign penetration, competition, and financial freedom: Evidence from the banking industries in emerging markets
نفوذ خارجی ، رقابت و آزادی مالی: شواهدی از صنایع بانکی در بازارهای نوظهور-2019
Traditional theories suggest that foreign entry intensifies competition and improves efficiency in a banking sector. However, the positive impacts may be offset by several factors, such as foreign banks’ “cherry-picking” lending practice, mergers & acquisitions, and the “crowd-out” effect. Based on a sample of commercial and savings banks collected from Bankscope, this paper investigates the effects of foreign penetration on bank competition in the host countries. Using the two-step Arellano-Bond system GMM method, we show that the entry of foreign banks enhances competition in the banking systems among the sampled developing countries between 2000 and 2014. The positive relationship between foreign penetration and banking competition is more conspicuous after the 2008–2009 global recession. Latin American countries appear to benefit more from foreign bank penetration during the sample period than emerging markets in Asia. Also, the level of a host country’s financial freedom has a moderation effect on the “foreign penetration—competition” nexus.
Keywords: Emerging market economies | Banking | Foreign penetration | Competition
Intricacies of competition, stability, and diversification: Evidence from dual banking economies
پیچیدگی های رقابت ، ثبات و تنوع: شواهدی از اقتصاد بانکی دوگانه-2019
This paper investigates the nexus of competition and stability by introducing the interaction of diversification and competition. We use a sample of both conventional and Islamic banks from 14 dual banking economies over 2005–2016. The core finding illustrates that competition does not impact bank stability and that diversification is insignificant in the competition-stability nexus. Further, we find that concentration is beneficial for the banking stability of both types of banks. In most of our results, we found no difference in the impact of competition and diversification on the stability of conventional and Islamic banks. To put our findings in a broader context, we argue that no difference between the business models can be considered an early signal of possible convergence between the two systems.
Keywords: Bank competition | Diversification | Stability | Dual banking economi
Democracy, regulation and competition in emerging banking systems
دموکراسی ، مقررات و رقابت در سیستمهای نوظهور بانکی-2019
This paper develops a political economy framework to analyse the relations among democracy, financial regulation and banking competition in the emerging banking systems of Central and Eastern Europe. We develop extensive new yearly non-structural indices of bank competition instead of concentration indices as in the previous literature that show its evolution over time with the level of democracy. In addition, we directly test for linkages between democracy, financial regulation and banking competition. Using an unbalanced panel data set over the period 1994–2016 for 617 banks, we show that more democratic countries with better regulatory framework lead to the enhancement of competition. We also find significant support for the core hypothesis that financial regulatory framework in a “partially” democratic environment is inadequate. Given that financial regulatory framework in a “partially” democratic environment can be inadequate we find a U-shaped relation in the sense that there is a threshold level of democracy beyond which banking systems in those countries are more competitive
Keywords: Democracy | Regulation | Compe
Does oligopolistic banking friction amplify small open economy business cycles? Evidence from Australia
آیا اصطکاک بانکی الیگپولیستی چرخه های کوچک تجارت اقتصادی را تقویت می کند؟ شواهدی از استرالیا-2019
This paper studies financial friction arising from oligopolistic bank competition and its impacts on a small open economy’s business cycles by applying imperfect competition and endogenous firm entry theory. Using Australian data, the estimated model implies a countercyclical mark up in lending rate that varies inversely with number of banks. Such bank sector has a distinct shock propagation mechanism that often amplifies business cycles, depending on the type of shock. Balance sheet effects appear different compared to competitive banks, due to strategic bank behaviour. Unlike previous estimated small open economy general equilibrium studies, the model can capture substantial international transmissions
Keywords: Oligopolistic banks | DSGE model | Bank entry | Open economy | Bayesian inference
MARKET CONCENTRATION AND BANK COMPETITION IN EMERGING ASIAN COUNTRIES OVER PRE AND POST THE 2008 GLOBAL FINANCIAL CRISIS
تمرکز بازار و رقابت بانکی در ورود به کشورهای آسیایی بیش از قبل و بحران مالی جهانی سال 2008-2019
This paper examines the relationships between market concentration, bank competition, and efficiency in banking across six emerging Asian countries namely Bangladesh, India, Indonesia, Malaysia, the Philippines and Vietnam over the period 2005 to 2012. The countries selected for this study operate commercial banking activities with a comparatively large number of both publicly listed and private commercial banks providing a broad range of commercial banking services. For example, banks in Bangladesh, India and Vietnam used to be predominantly state-owned. But over the last few decades, governments have been issuing licenses to private owners. The methodological approach taken by our study provides an important and original contribution to the extant literature by testing various hypothesis that investigate the relationship between competition and efficiency across banks from a select group of Asian countries. We find that market concentration has a positive effect whereas competition has a negative effect on the efficiency of banks operating in these countries. This finding conveys a critically important message to the regulators of banks in these countries: there is a trade-off between quantity and quality. Our analyses also reveal that the effect of bank size on efficiency is positive whereas the effect of liquidity risk on efficiency is negative.This again supports the conventional wisdom that large banks are in a position to provide cost efficient services because they have the ability to attain economies of scale and scopes. Here again, the regulators have very important roles to play: while they have to put in place effective mechanism preventing big banks from being an oligarchy; at the same time, they should make sure that banks get liquidity support as funding pressure builds up
Competition and credit procyclicality in European banking
رقابتی بودن و اعتبار در بانکداری اروپا-2019
This paper empirically assesses how competition in the banking sector affects credit procyclicality by estimating both an interacted panel VAR model using macroeconomic data and a single-equation model with bank-level data. These two empirical approaches show that a deviation of actual GDP from potential GDP leads to greater credit fluctuations in economies where bank competition is weak. This suggests that increased market power for banks increases the financial accelerator mechanism, which is consistent with recent macroeconomic models showing that monopolistic banking tends to increase macroeconomic volatility by making credit cheaper during booms and more expensive during recessions.
Keywords: Credit cycle | Business cycle | Bank competition | Interacted panel VAR
Bank performance in China: A Perspective from Bank efficiency, risk-taking and market competition
عملکرد بانک در چین: دیدگاهی از کارآیی بانک ، ریسک پذیری و رقابت در بازار-2019
The current paper contributes to the empirical literature on bank profitability by testing the jointimpact of different types of risk, competition in different banking markets and different types of efficiency on bank profitability using a sample of Chinese commercial banks over the period 2003–2017. In particular, we fill in the gap of the empirical studies by examining the impact of efficiency on profitability when banks undertake different levels of risk-taking behaviour and face different degrees of competition. The results show that competition in the Chinese banking markets (deposit market, loan market and non-interest income market) is stronger over the period 2003–2005 and also 2014–2017. In addition, it is found that bank size, cost efficiency, profit efficiency and inflation are significantly related to bank profitability. Finally, we find that the positive impact of cost efficiency on profitability is stronger when banks undertake higher levels of risk and face more competition.
Keywords: Interest rate liberalization | Bank competition | Bank efficiency | Bank profitability | China
How do regulatory ability and bank competition affect the adoption of explicit deposit insurance scheme and banks’ risk-taking behavior?
چگونه توانایی نظارتی و رقابت بانکی بر تصویب طرح صریح بیمه سپرده و رفتار ریسک پذیری بانکها تأثیر دارد؟-2019
In this study, we investigates how regulatory ability and bank competition affect the adoption of explicit deposit insurance scheme (eDIS) and banks risk taking behavior under the scheme. We build a regulator-bank dynamic game model to explain why the implicit deposit insurance scheme is not the optimal choice when the regulators regulatory ability is high. We also find that excessive competition makes banks take extreme risk and in such case eDIS is ineffective in preventing the occurrence of banking crises. Otherwise, eDIS can prevent the occurrence of banking crises effectively although banks take excessive risk under the scheme. Our model identifies that the effects of bank competition and regulatory ability on the banks risk incentives created by eDIS are interdependent. Empirical analysis on 190 countries worldwide confirms that: (1) higher regulatory ability increases the probability of eDIS adoption. (2) Under the eDIS, less bank competition and higher regulatory ability could reduce the risk of banking during normal times. In addition, increased regulatory ability significantly weakens the positive effect of banking competition on banking risk. (3) Under the eDIS, more bank competition increases the probability of banking crisis occurrence.
Keywords: Deposit insurance scheme | Regulatory ability | Bank competition | Banks risk-taking behavio
Financial structure, bank competition and income inequality
ساختار مالی ، رقابت بانکی و نابرابری درآمدی-2019
This paper empirically investigates the contribution of finance to income inequality with particular emphasis on the role of financial structure (i.e., stock market orientation) and banking market structure (bank market power), an aspect that has been overlooked in the literature. It employs recently developed cointegration techniques that take into account cross-section correlation and simultaneity in non-stationary panels. The paper finds that income inequality increases with financial deepening but decreases with a more market-oriented financial system. It is also found that greater concentration, less competition in the banking sector strengthens income inequality. These effects are found stronger during the banking crisis period, for high-income countries or countries with better quality of political institutions. The data thus suggest that financial reform toward promoting stock market development, enhancing competition or lessening concentration in the banking sector is beneficial to income distribution.
Keywords: Income inequality | Financial development | Financial structure | Concentration | Competition