Does institutional quality reduce the impact of market concentration on bank stability? Evidence of developing countries

Hai-Tuan Nguyen

Cogent Economics & Finance, 2023, vol. 11, issue 2, 2244769

Abstract: This study investigates how market concentration (MC) and institutional quality (IQ) influence bank stability in developing nations, focusing on 80 banks in the ASEAN 4 countries (Indonesia, the Philippines, Malaysia, and Thailand) from 2006 to 2019. The study utilises the generalised method of moments technique to address concerns related to autocorrelation and endogeneity. The findings of the research are noteworthy. Firstly, a positive correlation between bank stability and market concentration is established, supporting the concentration-stability hypothesis. Banks operating in highly concentrated markets tend to exhibit higher stability compared to those in less concentrated markets. However, negative coefficients on square market concentration suggest a potential inverted U-shaped relationship, indicating that market concentration enhances bank stability up to a certain threshold. Secondly, the study highlights the significant impact of institutional quality on bank stability within the ASEAN 4 region. Furthermore, the study found that institutional quality might mitigate the influence of market concentration on bank stability. These results underscore the importance of a well-defined strategy for bank managers and bankers. When market concentration reaches a specific threshold, optimal bank stability is observed, and higher institutional quality contributes to improved bank stability. This research pioneers examining the effects of banking system market concentration and institutional quality on the stability of ASEAN 4 banks.

Date: 2023
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1080/23322039.2023.2244769 (text/html)
Access to full text is restricted to subscribers.

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:taf:oaefxx:v:11:y:2023:i:2:p:2244769

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/OAEF20

DOI: 10.1080/23322039.2023.2244769

Access Statistics for this article

Cogent Economics & Finance is currently edited by Steve Cook, Caroline Elliott, David McMillan, Duncan Watson and Xibin Zhang

More articles in Cogent Economics & Finance from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().