Bank-based versus market-based financing: Implications for systemic risk

Joost Bats () and Aerdt Houben

Journal of Banking & Finance, 2020, vol. 114, issue C

Abstract: Against the background of the great financial crisis, this paper assesses the merits of bank-based versus market-based financing by exploring the relationship between financial structure and systemic risk. The findings indicate that bank-based financial structures are associated with higher systemic risk than market-based financial structures. In relatively bank-based financial structures, bank financing is found to increase systemic risk while market financing decreases systemic risk. By contrast, in relatively market-based financial structures, bank and market financing do not impact systemic risk. Together, the results signal that market-based financial structures are more resilient to systemic risk.

Keywords: Financial structure; Systemic risk; Bank financing; Market financing (search for similar items in EconPapers)
JEL-codes: E44 G10 G21 O16 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (38)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:114:y:2020:i:c:s0378426620300443

DOI: 10.1016/j.jbankfin.2020.105776

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