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Market power and risk-taking of banks: Some semiparametric evidence from emerging economies

Ji Wu, Mengmeng Guo, Minghua Chen and Bang Jeon ()

Emerging Markets Review, 2019, vol. 41, issue C

Abstract: We investigate the impact of market power of banks on their risk-taking. Appling bank-level data from 35 emerging economies during the period of 2000–2014 to our semiparametric model of the market power-bank risk nexus with the Bayesian inference, we present consistent evidence that there is a significant nonlinear relationship between market power and risk-taking of banks. Bank stability is found bolstered with increasing market power, but this relationship tends to weaken and even reverse as banks' market power grow further over a threshold level.

Keywords: Market power; Bank risk-taking; Emerging economies; JEL classification: G21; G15 (search for similar items in EconPapers)
Date: 2019
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Working Paper: Market power and the risk-taking of banks: Some semiparametric evidence from emerging economies (2018) Downloads
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DOI: 10.1016/j.ememar.2019.100630

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