Bank competition and financial stability: Much ado about nothing?

Arbeitspapier

The theoretical literature gives conflicting predictions on how bank competition should affect financial stability, and dozens of researchers have attempted to evaluate the relationship empirically. We collect 598 estimates of the competitionstability nexus reported in 31 studies and analyze the literature using meta-analysis methods. We control for 35 aspects of study design and employ Bayesian model averaging to tackle the resulting model uncertainty. Our findings suggest that the definition of financial stability and bank competition used by researchers influences their results in a systematic way. The choice of data, estimation methodology, and control variables also affects the reported coefficient. We find evidence for moderate publication bias. Taken together, the estimates reported in the literature suggest little interplay between competition and stability, even when corrected for publication bias and potential misspecifications.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IES Working Paper ; No. 7/2015

Classification and Topics

• Classification: Wirtschaft ; Survey Methods; Sampling Methods ; Bayesian Analysis: General ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Industrial Organization and Macroeconomics: Industrial Structure and Structural Change; Industrial Price Indices
• Subject: Bayesian model averaging ; bank competition ; financial stability ; publication selection bias ; meta-analysis

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Žigraiová, Diana ; Havránek, Tomáš
• Event: Veröffentlichung
• (who): Charles University in Prague, Institute of Economic Studies (IES)
• (where): Prague
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/120440
• Last update: 10.03.2025, 11:44 AM CET