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Risk and competitiveness in the Italian banking sector

Francesco Marchionne () and Alberto Zazzaro ()

No 147, Mo.Fi.R. Working Papers from Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences

Abstract: In this paper, we analyse the relationship between risk and competition in the Italian banking sector over the period from 2006 to 2010. We employ OLS and panel estimators to estimate the impact of the Lerner index, a measure of bank market power, on the Altman Z-score, a proxy of the insolvency probability. Our results are consistent with the traditional charter value paradigm and reject the new risk-shifting paradigm proposed by Boyd-De Nicolo' (2005). We find that the relationship between bank risk and competition becomes more tightening during the financial crisis. Our results are robust to different definitions of crisis and different specifications.

Keywords: bank; competition; stability; financial crisis (search for similar items in EconPapers)
JEL-codes: G01 G21 G33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cfn and nep-com
Date: 2018-02
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