Bank Competition and Risk-Taking Under Market Integration

Kaniṣka Dam () and Rajdeep Sengupta ()
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Kaniṣka Dam: Economics Division, Centro de Investigación y Docencia Económicas, Mexico City 01210, Mexico
Rajdeep Sengupta: Research Division, Federal Reserve Bank of Kansas City, Kansas City, Missouri 64198

Management Science, 2025, vol. 71, issue 8, 7161-7181

Abstract: Linkages between bank competition and risk-taking are analyzed in a model where market integration is the principal driver of increased competition. Risk implications of across-market competition under banking market integration are significantly different from that of within-market competition. Although both modes of competition increase the number of competitor banks, across-market competition yields a bank-customer effect that can potentially reverse any relation that prevails between within-market competition and risk-taking. This result suggests that the lack of consensus in the bank competition-financial stability literature is not an anomaly but an inherent feature of the analysis.

Keywords: bank competition; deregulation; risk-shifting; market integration (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:71:y:2025:i:8:p:7161-7181

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