Bank sectoral concentration and (systemic) risk: Evidence from a worldwide sample of banks
Thorsten Beck (),
Olivier De Jonghe () and
No 12009, CEPR Discussion Papers from C.E.P.R. Discussion Papers
We propose a new stock return-based methodology to measure three dimensions of banks' sectoral concentration (specialization, differentiation,, financial sector exposure). Using these measures for a broad cross-section of banks and countries between 2002 and 2012, we estimate both the short- and long-run relationship between banks' sectoral concentration and banks' performance and stability. We find that bank volatility and systemic risk exposure decrease with banks' sectoral specialization and increase with banks' sectoral differentiation and financial sector exposure. These effects are significantly stronger in the long-run. Moreover, there exists important time and cross- country variation, with effects generally stronger during systemic stress periods.
Keywords: bank concentration; bank risk; differentiation; factor model; sectoral specialization; systemic stability (search for similar items in EconPapers)
JEL-codes: G01 G21 G28 L5 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban and nep-rmg
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