Market concentration, risk-taking, and bank performance: Evidence from emerging economies

Jianhua Zhang, Chunxia Jiang (), Baozhi Qu and Peng Wang

International Review of Financial Analysis, 2013, vol. 30, issue C, 149-157

Abstract: This paper investigates the relationship between market concentration, risk-taking, and bank performance using a unique dataset of the BRIC banks over the period 2003–2010. We find a negative association between market concentration and performance, in support of the “quiet life” hypothesis. We also find that banks taking a lower level of risks perform better, in favor of prudential practice. Moreover, the BRICs' banking sectors were all negatively affected by the 2007–2008 global financial crisis with China and Russia being the least and most affected, respectively. On average Chinese and Brazilian banks outperform Indian and Russian ones, indicating that China and Brazil have more favorable institutional infrastructure. These results are robust to alternative model specifications and estimation techniques. Our analysis may have important policy implications for bankers and regulators in the BRICs and other developing and transition countries.

Keywords: Market concentration; Risk-taking; Bank performance; Stochastic frontier analysis; Brazil; Russia; India; China (search for similar items in EconPapers)
JEL-codes: G21 G28 O57 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (43)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:30:y:2013:i:c:p:149-157

DOI: 10.1016/j.irfa.2013.07.016

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