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

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

Economic Modelling, 2019, vol. 83, issue C, 111-126

Abstract: 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 economies (search for similar items in EconPapers)
JEL-codes: G21 G33 G38 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:83:y:2019:i:c:p:111-126

DOI: 10.1016/j.econmod.2019.02.002

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