Bank Risk Taking and Competition: Evidence from Regional Banking Markets

Thomas Kick and Esteban Prieto ()

VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order from Verein für Socialpolitik / German Economic Association

Abstract: This study investigates the bank competition-stability nexus using a unique regulatory dataset provided by the Deutsche Bundesbank over the period 1994 to 2010. First, we use outright bank defaults as the most direct measure of bank risk available and contrast the results to weaker forms of bank distress. Second, we control for a wide array of different time-varying characteristics of banks which are likely to influence the competition-risk taking channel. Third, we include different measures of competition, contestability and market power, each corresponding to a different contextual level of a bank s competitive environment. From a policy perspective, our results indicate that competition-reducing regulation does not necessarily enhance the stability of individual banks. Instead, our results show that the degree of competition affects bank risk in different ways; some of them with stability-enhancing effects, but others apparently not.

JEL-codes: C35 G21 G32 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (12)

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Related works:
Working Paper: Bank risk taking and competition: Evidence from regional banking markets (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc13:79919

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