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Bank competition, concentration and financial stability in the Turkish banking industry

Saadet Kasman and Adnan Kasman

Economic Systems, 2015, vol. 39, issue 3, 502-517

Abstract: This paper analyzes the impact of competition and concentration on bank stability in the Turkish banking industry over the period 2002–2012. The Boone indicator and the efficiency-adjusted Lerner index are used as proxies for competition, while the non-performing loans (NPL) ratio and Z-scores are used as proxies for bank stability. The main results indicate that competition is negatively related to the NPL ratio but positively related to the Z-score. The results further indicate that greater concentration has a positive impact on the NPL and a negative impact on the Z-score. We also use a quadratic term of the competition measures to capture a possible non-linear relationship between competition and stability. The results show that the coefficient of the quadratic term is negative for the NPL model and positive for the Z-score model. Overall, our findings provide support for the competition-fragility view.

Keywords: Financial stability; Bank competition; Lerner index; Boone indicator; Turkish banking (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2015
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Handle: RePEc:eee:ecosys:v:39:y:2015:i:3:p:502-517