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Market Structure and Financial Stability: Theory and Evidence

Adalgiso Amendola (), Cristian Barra, Marinella Boccia () and Anna Papaccio ()
Additional contact information
Adalgiso Amendola: CELPE - Centre of Labour Economics and Economic Policy, University of Salerno - Italy, Postal: via Giovanni Paolo II, 132, 84084 - Fisciano (SA), ITALY, https://docenti.unisa.it/001291/home
Marinella Boccia: CELPE - Centre of Labour Economics and Economic Policy, University of Salerno - Italy, Postal: via Giovanni Paolo II, 132, 84084 - Fisciano (SA), ITALY, https://sites.google.com/a/unifg.it/marinella-boccia/
Anna Papaccio: CELPE - Centre of Labour Economics and Economic Policy, University of Salerno - Italy, Postal: via Giovanni Paolo II, 132, 84084 - Fisciano (SA), ITALY, https://www.researchgate.net/profile/Anna_Papaccio

No 156, CELPE Discussion Papers from CELPE - Centre of Labour Economics and Economic Policy, University of Salerno, Italy

Abstract: This paper investigates on the relationship between market structure and financial stability. More in details, considering the profit-oriented commercial banks and mutual cooperative banks, this work presents both a theoretical and an empirical approach in order to test the above relationship. As to the theoretical framework a case of imperfect mixed-Cournot competition between the two types of agents and a form of credit risk are considered. Moreover, to empirically explore the link between competition and financial stability the analysis employs a parametric approach using the ABI data allowing banks’ information from 1994 to 2015. The overall results show a negative trade-off between concentration and financial stability. However, this result, in the theoretical model, is strictly dependent on mutual cooperative banks’ presence in the market.

Keywords: Market Structure; Bank’s Risk; Profitability; Financial Stability; U-shaped Relationship (search for similar items in EconPapers)
JEL-codes: G21 L13 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2018-11-30
New Economics Papers: this item is included in nep-ban and nep-com
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