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Competition and stability in the European Union banking sector
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Autores
Orientador(es)
Resumo(s)
This paper empirically tests the two competing hypotheses regarding the relationship between
competition and stability: the competition-fragility hypothesis and the competition-stability
hypothesis. The banking sector stability is first proxied by the estimated Z-score that provides a
measure of overall bank stability. Further, the paper separately considers some specific
constituent components of the Z-score measure to analyse different aspects of the bank stability:
bank profitability and bank capitalisation. Two different measures are used to represent bank
competition: the Herfindahl-Hirschman Index (a specific measure of market concentration), and
the Boone indicator (which measures competition from an efficiency perspective). Using data
sourced from the Moody’s Analytics BankFocus database, the paper applies panel estimations to
a relatively large panel including 784 relevant banks of all the 27 European Union countries,
between 2006 and 2021. The main findings overall confirm the validity of the competitionfragility hypothesis. Moreover, the results obtained for two specific EU countries: Germany and
France, highlight some specific differences in particular regarding the effects of bank market
concentration, and the responses to the crises that affected the EU banking institutions over the
considered period. The findings of this paper reinforce the relevance of the policy makers’ role
and give room to some recommendations.
Descrição
Palavras-chave
Bank stability bank competition Z-score Herfindahl-Hirschman Index Boone indicator EU banking sector
Contexto Educativo
Citação
Ferreira, Cândida (2023). "Competition and stability in the European Union banking sector". REM Working paper series, nº 0261/2023
Editora
ISEG - REM - Research in Economics and Mathematics