Bank competition and financial stability: A comparison of commercial banks and mutual savings banks in Korea

Jin Q. Jeon and Kwang Kyu Lim

Pacific-Basin Finance Journal, 2013, vol. 25, issue C, 253-272

Abstract: In this study, we provide new evidence that the relationship between banking competition and financial stability varies depending on the characteristics of banks. By using a sample of two different types of banks, Korean commercial banks and mutual savings banks, we find that the non-linear relationship between competition and the stability of commercial banks reflects a trade-off between the interest effect and risk-shifting effect. However, consistent with Boyd and De Nicolo (2005), competition has a positive effect on the stability of mutual savings banks with greater business risk and weaker corporate governance. Our results provide important implications on banking competition policy.

Keywords: Bank competition; Stability; Risk shifting; Mutual saving banks; Commercial banks (search for similar items in EconPapers)
JEL-codes: G21 G23 L1 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (27)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:25:y:2013:i:c:p:253-272

DOI: 10.1016/j.pacfin.2013.10.003

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