Bank competition and credit risk: The case of Peru

Jorge Pozo and Youel Rojas

Journal of Financial Stability, 2023, vol. 66, issue C

Abstract: This paper studies empirically the relationship between competition in the loan market and credit risk in the Peruvian financial system. Our finding challenges the theoretical work of Martinez-Miera and Repullo (2010) that finds a U-shaped relationship between competition and risk-taking, as well as the empirical work of Jiménez et al. (2013) that provides evidence that supports this nonlinear relationship in a developed economy as Spain. In contrast, we find that in Peru the shape of the relationship between competition and credit risk is more complex and it depends on the competition measure.

Keywords: Competition; Credit risk; Risk-taking; Financial stability (search for similar items in EconPapers)
JEL-codes: E44 G21 L11 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:66:y:2023:i:c:s1572308923000190

DOI: 10.1016/j.jfs.2023.101119

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