Economics at your fingertips  

The concentration–stability controversy in banking: New evidence from the EU-25

Pieter IJtsma, Laura Spierdijk and Sherrill Shaffer

Journal of Financial Stability, 2017, vol. 33, issue C, 273-284

Abstract: This study explores whether the concentration–stability relation is affected by the level of analysis; i.e., bank-level versus country-level stability. The diverging results in the literature suggest that we may indeed expect differences between the two levels. With the z-score as the measure of financial stability, our theoretical analysis confirms that we may find such differences. Yet our empirical analysis for the EU-25 during the 1998–2014 period finds no economically significant effect of concentration on either the bank-level or the country-level z-score. The finding that concentration hardly affects stability at both levels of analysis is an indication of robustness in the empirical concentration–stability relation not previously established in the literature. This finding further suggests that neither supervisory restructuring, nor normal market-driven mergers, are likely to be substantially harmful to financial stability.

Keywords: Banking concentration; Financial stability; Market structure; Systemic risk (search for similar items in EconPapers)
JEL-codes: G21 G28 G34 L11 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Journal of Financial Stability is currently edited by I. Hasan, W. C. Hunter and G. G. Kaufman

More articles in Journal of Financial Stability from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2019-11-30
Handle: RePEc:eee:finsta:v:33:y:2017:i:c:p:273-284