How Does Competition Impact Bank Risk-Taking?
Gabriel Jimenez,
Jose Lopez and
Jesús Saurina ()
No 1005, Working Papers from Banco de España
Abstract:
A common assumption in the academic literature is that franchise value plays a key role in limiting bank risk-taking. As market power is the primary source of franchise value, reduced competition in banking markets has been seen as promoting banking stability. We test this hypothesis using data for the Spanish banking system. We find that standard measures of market concentration do not affect bank risk-taking. However, we find a negative relationship between market power measured using Lerner indexes based on bank-specific interest rates and bank risk. Our results support the franchise value paradigm.
Keywords: bank competition; franchise value; Lerner index; credit risk; financial stability (search for similar items in EconPapers)
JEL-codes: G21 L11 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2010-03
New Economics Papers: this item is included in nep-ban, nep-bec, nep-com, nep-mic and nep-rmg
References: Add references at CitEc
Citations: View citations in EconPapers (53)
Downloads: (external link)
http://www.bde.es/f/webbde/SES/Secciones/Publicaci ... o/10/Fic/dt1005e.pdf First version, March 2010 (application/pdf)
Related works:
Working Paper: How does competition impact bank risk-taking? (2007) 
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:bde:wpaper:1005
Access Statistics for this paper
More papers in Working Papers from Banco de España Contact information at EDIRC.
Bibliographic data for series maintained by Ángel Rodríguez. Electronic Dissemination of Information Unit. Research Department. Banco de España ().