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The Relationship between Banking Competition and Stability in Developing Countries: The Case of Libya

Haytem Troug () and Rashid Sbia ()

MPRA Paper from University Library of Munich, Germany

Abstract: In our paper, we examined the relationship between non-performing loans, as a measure of stability, and concentration, as a measure of competition, in the Libyan banking sector. We used aggregate quarterly data for the 15 commercial banks in the country during the period 2002-2013. A broad set of tests were conducted to measure the relationship between the two variables, and alternative robustness tests were conducted to assure our core finding that less competition in the banking sector leads to a more resilient banking sector. Thus, our results offer empirical support against “competition–stability” theory and conform to the “competition–fragility” literature. We conclude by recommending the need to inspect in more detail (on a bank by bank level) the relationship between competition and fragility in developing countries in general and in Libya in particular.

Keywords: Banking competition; Financial stability; developing countries; Oil exporting countries; Libya. (search for similar items in EconPapers)
JEL-codes: C50 C58 G00 G21 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-ara, nep-ban, nep-cfn and nep-com
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