Bank risk-taking in developed countries: The influence of market power and bank regulations
File(s)Danisman and Demirel 2018.docx (183.94 KB)
Accepted version
Author(s)
Danisman, GO
Demirel, P
Type
Journal Article
Abstract
Using a sample of 6936 banks in 25 developed countries between 2007 and 2015, the paper explores the impact of market power and bank regulatory variables, such as capital stringency, restrictions in activities and the power of supervisory agencies, on bank stability. Various dimensions of bank risk exposures are considered. and the findings reveal that higher market power in banking decreases the risky behavior of banks, confirming that the competition-fragility view holds. Capital requirements are the strongest regulatory tool for decreasing bank risk, and they decrease bank risk more for banks with more market power. Higher activity restrictions strongly increase bank risk for developed markets, even though the increase in riskiness is mitigated for banks with higher market power. While powerful supervisory agencies, in general, lead to an increase in bank risk, this increase is exacerbated for higher market-powered banks.
Date Issued
2019-03-01
Online Publication Date
2019-12-20T07:00:24Z
Date Acceptance
2018-12-18
ISSN
1042-4431
Publisher
Elsevier BV
Start Page
202
End Page
217
Journal / Book Title
Journal of International Financial Markets, Institutions and Money
Volume
59
Copyright Statement
© 2018 Elsevier Ltd. All rights reserved. This manuscript is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Licence http://creativecommons.org/licenses/by-nc-nd/4.0/.
Source Database
crossref
Subjects
Social Sciences
Business, Finance
Economics
Business & Economics
Bank risk-taking
Bank competition
Financial stability
Regulations
Developed markets
MORAL HAZARD
COMPETITION
SUPERVISION
Finance
1502 Banking, Finance and Investment
1402 Applied Economics
Publication Status
Published
Date Publish Online
2018-12-20