Does Banking System Transparency Enhance Bank Competition? Cross-Country Evidence

Irina Andrievskaya () and Maria Semenova ()
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Maria Semenova: National Research University Higher School

HSE Working papers from National Research University Higher School of Economics

Abstract: There seems to be a consensus among regulators and scholars that in order to improve the functioning of a banking system and to stimulate bank competition, it is necessary to raise the level of bank information transparency. However, empirical studies which examine the determinants of competition in the financial sector, the effect of competition on financial stability, or the relationship between transparency and bank stability, leave aside the link between transparency and competition. The aim of this paper is to fill this gap in the literature. To test the hypothesis that greater bank information disclosure is associated with lower market power and lower concentration in the banking system, we use country-level data covering 213 countries. The years under consideration are 1998, 2001, 2005 and 2010, which correspond to the years of the World Bank's Banking Regulation and Supervision Survey rounds. Our findings do not always support the conventional wisdom: countries with higher levels of transparency have lower levels of bank concentration, while the link between transparency and competition is less pronounced. The effect from information disclosure grows – for both concentration and market power – with an increase of bank credit risks

Keywords: Banking system; transparency; competition; concentration. (search for similar items in EconPapers)
JEL-codes: F01 G21 G28 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2014
New Economics Papers: this item is included in nep-ban and nep-cta
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Citations: View citations in EconPapers (1)

Published in WP BRP Series: Financial Economics / FE, September 2014, pages - 19

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Journal Article: Does banking system transparency enhance bank competition? Cross-country evidence (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:hig:wpaper:35/fe/2014

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