Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Competition, efficiency, and stability in banking
AU - Schaeck, Klaus
AU - Cihák, Martin
PY - 2014
Y1 - 2014
N2 - We examine the effect of competition on banking stability using a new measure of competition based on the reallocation of profits from inefficient banks to efficient ones. In a sample of European Banks, we find that this measure does capture competition, that competition is stability-enhancing, and that the stability-enhancing effect of competition is greater for healthy banks than for fragile ones. Our results suggest that efficiency is the conduit through which competition contributes to stability and that regulators must condition policy on the health of existing banks.
AB - We examine the effect of competition on banking stability using a new measure of competition based on the reallocation of profits from inefficient banks to efficient ones. In a sample of European Banks, we find that this measure does capture competition, that competition is stability-enhancing, and that the stability-enhancing effect of competition is greater for healthy banks than for fragile ones. Our results suggest that efficiency is the conduit through which competition contributes to stability and that regulators must condition policy on the health of existing banks.
U2 - 10.1111/fima.12010
DO - 10.1111/fima.12010
M3 - Journal article
VL - 43
SP - 215
EP - 241
JO - Financial Management
JF - Financial Management
SN - 0046-3892
IS - 1
ER -