Competition and bank stability

By M. Goetz. Journal of Financial Intermediation, 2017

256 citations recorded by the source corpus.

Does an increase in competition increase or decrease bank stability? I exploit how the state-specific process of interstate banking deregulation lowered barriers to entry into urban banking markets and find that greater competition significantly increases bank stability. This result is robust to the inclusion of additional fixed effects and other influences, such as merger and acquisitions or diversification. Moreover, I find that greater competition reduces banks' nonperforming loans and increases bank profitability. These findings suggest that competition increases stability as it improves bank profitability and asset quality.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/f3842ba898cf2d1f8707f7acfc2600c95a4625e6

Citations in the corpus