Competition in dual markets: Implications for banking system stability

Tastaftiyan Risfandy, Amine Tarazi and Irwan Trinugroho

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Abstract: This paper investigates whether Islamic and conventional banks' stability is differently impacted by competition in dual markets where the two bank types operate alongside each other. Using a sample of 123 Islamic and 647 conventional banks from 29 countries for a period between 2010 and 2018, we find robust evidence that competition erodes the stability of conventional banks only. The stability of Islamic banks is not impacted specifically where religion is more prevalent. Focusing more deeply on religiosity and the institutional environment, such as the ease of doing business and economic freedom, we also find that such factors matter in differently shaping the competition-fragility nexus for the two types of banks.

Date: 2022-05
Note: View the original document on HAL open archive server: https://hal.science/hal-04681689v1
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Published in Global Finance Journal, 2022, 52, pp.100579. ⟨10.1016/j.gfj.2020.100579⟩

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Related works:
Journal Article: Competition in dual markets: Implications for banking system stability (2022)
Working Paper: Competition in dual markets: Implications for banking system stability (2020)
Working Paper: Competition in dual markets: Implications for banking system stability (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04681689

DOI: 10.1016/j.gfj.2020.100579

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