Financial nexus: Efficiency and soundness in banking and capital markets

Bogdan Dima, Marius Sorin Dincă and Cristi Spulbar ()

Journal of International Money and Finance, 2014, vol. 47, issue C, 100-124

Abstract: Based on a modified version of the model used in Corvoisier and Gropp (2002) and De Guevara et al. (2005), we argue that banks' soundness, the structural characteristics and efficiency of the banking sector along with the development of the capital markets constitute a financial nexus. For a data set of 63 developed and developing countries, we find evidences that efficiency significantly modulates the linkages between concentration and soundness. We also find that capital markets' development supports a stable evolution in banking sector. For the relationship between capital markets and soundness, our findings appear to be robust for various measures of the considered variables as well as for different estimation techniques. Regarding the impact of the concentration upon soundness, the results obtained display a certain sensitivity about the way concentration is measured.

Keywords: Bank concentration; Efficiency and soundness; Z-scores; Lerner index; Arellano and Bover models; Two-stages quantile regression models (search for similar items in EconPapers)
JEL-codes: G21 G28 L11 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:47:y:2014:i:c:p:100-124

DOI: 10.1016/j.jimonfin.2014.05.002

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