The Impact of Bank Competition on Stability in Central Asia: The Moderating Role of Bank Digitalization

Emil Begimkulov and Mónika Kuti

Public Finance Quarterly, 2025, vol. 71, issue 1, 87-106

Abstract: This study investigates the impact of bank competition on financial stability in the Central Asian banking sector, with a focus on the moderating role of bank digitalization. The research addresses a critical question—whether digitalization reinforces or weakens the stabilizing effects of competition—in a region characterized by early-stage digital adoption and concentrated markets. Given the growing reliance on technology in banking, understanding its role in shaping risk dynamics is both scientifically relevant and practically important for policymakers and financial institutions. The study employs dynamic panel data analysis using the two-step GMM estimator. Bank stability is measured using the z-score, Competition is assessed through the Panzar-Rosse Model, and digitalization is captured via a composite index. The results reveal that bank competition improves stability, while digitalization alone initially increases risk due to operational vulnerabilities. However, the interaction between competition and digitalization has a positive and stabilizing effect, enhancing risk management and efficiency. These findings highlight the transformational role of digitalization, emphasizing the need for balanced competition policies and support for digital adoption to ensure financial stability in emerging markets.

Keywords: bank; competitiveness; digitalization; financial stability (search for similar items in EconPapers)
JEL-codes: G21 G28 G32 L11 L25 O16 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://unipub.lib.uni-corvinus.hu/11404/ (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pfq:journl:v:71:y:2025:i:1:p:87-106

DOI: 10.35551/PFQ_2025_1_5

Access Statistics for this article

More articles in Public Finance Quarterly from Corvinus University of Budapest Contact information at EDIRC.
Bibliographic data for series maintained by Adam Hoffmann ().