Concentration and Foreign Penetration in Latin American Banking Sectors: Impact on Competition and Risk

By E. L. Yeyati, A. Micco. 2003

557 citations recorded by the source corpus.

In recent years, Latin American banking sectors have experienced an accelerated process of concentration and foreign penetration that has prompted diverse views regarding its implications for the competitive behavior of banks and for the financial stability of the system as a whole. Exploiting a rich bank-level balance sheet database for eight Latin American countries, we examine the evolution of concentration and foreign penetration indicators and their impact on competition and risk. We find that, while concentration did not reduce competition in the industry, foreign penetration appears to have led to less competitive banking sectors. Moreover, we find banking sector fragility to be positively related to competition and, through this channel, negatively related to foreign participation, despite the fact that foreign banks in the region are associated with higher insolvency risk due to higher leverage ratios and more volatile returns.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/d97d37a3b295eaed4fa5a6c694b459e790856d29

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Citations in the corpus

Deposit Insurance Coverage, Ownership, and Banks' Risk-Taking in Emerging Markets (2010, background): “24 The lower CAP/TA in countries with high foreign ownership is consistent with results in Leye Yeyati and Micco (2007).”
A Three‐Country Comparison of the Business Success versus Failure Prediction Model (2010, background): “It is also possible to find some studies regarding small firm efficiency and in-depth studies regarding their characteristics (Yeyati and Micco 2007; Silva, Majluf, and Paredes 2006; Cabrera et al. 2002), but there is no reference with regard to the specific causes”
What are the driving forces of bank competition across different income groups of countries (2014, methodology): “…work, a 4 For a body of recent literature using H-statistic to gauge the degree of bank competition, see, e.g. Mamatzakis et al. (2005), Levy Yeyati and Micco (2007) and Delis (2010) for emerging economies, and Matthews et al. (2007) an Goddard and Wilson (2009) for advanced economies (for…”
Financial liberalization and bank risk-taking: International evidence (2014, unknown): “The results obtained by Levy-Yeyati and Micco (2007) for eight LatinAmerican countries indicate how a higher level of competition in their banking sectors increases bank risk-taking.”
Bank competition and financial stability in Asia Pacific (2014, background): “6 See, for example, De Nicol´o et al. (2003), Beck et al. (2006a), Boyd et al. (2006), Yeyati and Micco (2007), Berger et al. (2009), Schaech and Cihak (2008), Schaeck et al. (2009), Uhde and Heimeshoff (2009), Behr et al. (2010), Turk-Ariss (2010), Agoraki et al. (2011), Soedarmon et al. (2011),…”
Bank Market Power, Economic Growth and Financial Stability: Evidence from Asian Banks (2011, background): “In a cross-country setting, Levy-Yeyati and Micco (2007) document that competition in banking erodes bank stability in Latin America.”
Do foreign banks increase competition? Evidence from emerging Asian and Latin American banking markets (2011, unknown): “Do foreign banks increase bankfin.2010.10.012 increasingly crucial role in restructuring and internationalizing banking markets in these economies.2 Assessing the impact of foreign bank penetration on the domestic banking sector in emerging economies is an important issue for academics and policy ma”
Access to Financial Services (2009, background): “There is a large body of evidence that suggests interventions to provide credit through government-owned ﬁnancial institutions have generally not been successful (La Porta, Lopez-de-Silanes, and Zamarripa 2003; Levy-Yeyati and Micco, 2007).”
Bank insolvency risk and time-varying Z-score measures (2013, unknown): “Starting with work by Boyd et al. (2006), Hesse and (cid:181)CihÆk (2007) and Yeyati and Micco (2007), it is now also increasingly being implemented as a time-varying measure in panel studies.”