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Bank Performance, Financial Stability and Market Competition: do Cooperative and Non-Cooperative Banks Behave Differently?

Cristian Barra and Roberto Zotti ()

No 143, CELPE Discussion Papers from CELPE - Centre of Labour Economics and Economic Policy, University of Salerno, Italy

Abstract: We explore the relationship between bank performances and financial stability of the banking system taking into account the Italian context during the period 2001-2014 and relying upon highly territorially disaggregated data taken at municipality level, in order to better capture the differences across geographical areas. The z-score is used as financial stability indicator, while the performance of financial intermediaries is measured using a parametric method recently developed (Kumbhakar et al., 2014). By focusing both on cooperative and non-cooperative banks, the role of the market power, measured through a bank specific market share based on loans, deposits and assets, on the performances-stability nexus has been analyzed. The empirical evidence shows a positive relationship between bank performance and financial stability; furthermore, we provide evidence in line with the “competition-stability” view for cooperative banks while supporting the “competition-fragility” view for non-cooperative banks. Robustness checks have been performed in order to explore whether the results change at different level of concentration of the banking system.

Keywords: Management; Local banks; Market structure; Financial stability (search for similar items in EconPapers)
JEL-codes: C14 D21 G21 G28 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2017-03-05
New Economics Papers: this item is included in nep-ban and nep-eff
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