Bank Risk-Taking and Competition Revisited: New Theory and New Evidence
This paper studies two new models in which banks face a non-trivial asset allocation decision. The first model (CVH) predicts a negative relationship between banks'' risk of failure and concentration, indicating a trade-off between competition and stability. The second model (BDN) predicts...
Gespeichert in:
| 1. Verfasser: | |
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| Format: | Elektronisch E-Book |
| Sprache: | English |
| Veröffentlicht: |
Washington, D.C
International Monetary Fund
2006
|
| Schriftenreihe: | IMF Working Papers
Working Paper No. 06/297 |
| Online-Zugang: | UBW01 UEI01 LCO01 SBR01 UER01 SBG01 UBG01 FAN01 UBT01 FKE01 UBY01 UBA01 FLA01 UBM01 UPA01 UBR01 FHA01 FNU01 BSB01 TUM01 Volltext |
| Zusammenfassung: | This paper studies two new models in which banks face a non-trivial asset allocation decision. The first model (CVH) predicts a negative relationship between banks'' risk of failure and concentration, indicating a trade-off between competition and stability. The second model (BDN) predicts a positive relationship, suggesting no such trade-off exists. Both models can predict a negative relationship between concentration and bank loan-to-asset ratios, and a nonmonotonic relationship between bank concentration and profitability. We explore these predictions empirically using a cross-sectional sample of about 2,500 U.S. banks in 2003 and a panel data set of about 2,600 banks in 134 nonindustrialized countries for 1993-2004. In both these samples, we find that banks'' probability of failure is positively and significantly related to concentration, loan-to-asset ratios are negatively and significantly related to concentration, and bank profits are positively and significantly related to concentration. Thus, the risk predictions of the CVH model are rejected, those of the BDN model are not, there is no trade-off between bank competition and stability, and bank competition fosters the willingness of banks to lend |
| Beschreibung: | 1 Online-Ressource (49 p) |
| ISBN: | 1451865570 9781451865578 |
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| 520 | 3 | |a This paper studies two new models in which banks face a non-trivial asset allocation decision. The first model (CVH) predicts a negative relationship between banks'' risk of failure and concentration, indicating a trade-off between competition and stability. The second model (BDN) predicts a positive relationship, suggesting no such trade-off exists. Both models can predict a negative relationship between concentration and bank loan-to-asset ratios, and a nonmonotonic relationship between bank concentration and profitability. We explore these predictions empirically using a cross-sectional sample of about 2,500 U.S. banks in 2003 and a panel data set of about 2,600 banks in 134 nonindustrialized countries for 1993-2004. In both these samples, we find that banks'' probability of failure is positively and significantly related to concentration, loan-to-asset ratios are negatively and significantly related to concentration, and bank profits are positively and significantly related to concentration. Thus, the risk predictions of the CVH model are rejected, those of the BDN model are not, there is no trade-off between bank competition and stability, and bank competition fosters the willingness of banks to lend | |
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| index_date | 2024-07-03T20:13:22Z |
| indexdate | 2024-07-10T09:35:30Z |
| institution | BVB |
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| record_format | marc |
| series2 | IMF Working Papers |
| spelling | De Nicoló, Gianni Verfasser aut Bank Risk-Taking and Competition Revisited New Theory and New Evidence De Nicoló, Gianni Washington, D.C International Monetary Fund 2006 1 Online-Ressource (49 p) txt rdacontent c rdamedia cr rdacarrier IMF Working Papers Working Paper No. 06/297 This paper studies two new models in which banks face a non-trivial asset allocation decision. The first model (CVH) predicts a negative relationship between banks'' risk of failure and concentration, indicating a trade-off between competition and stability. The second model (BDN) predicts a positive relationship, suggesting no such trade-off exists. Both models can predict a negative relationship between concentration and bank loan-to-asset ratios, and a nonmonotonic relationship between bank concentration and profitability. We explore these predictions empirically using a cross-sectional sample of about 2,500 U.S. banks in 2003 and a panel data set of about 2,600 banks in 134 nonindustrialized countries for 1993-2004. In both these samples, we find that banks'' probability of failure is positively and significantly related to concentration, loan-to-asset ratios are negatively and significantly related to concentration, and bank profits are positively and significantly related to concentration. Thus, the risk predictions of the CVH model are rejected, those of the BDN model are not, there is no trade-off between bank competition and stability, and bank competition fosters the willingness of banks to lend Online-Ausg Boyd, John H. Sonstige oth Jalal, Abu M. Sonstige oth http://elibrary.imf.org/view/IMF001/00629-9781451865578/00629-9781451865578/00629-9781451865578.xml Verlag URL des Erstveröffentlichers Volltext |
| spellingShingle | De Nicoló, Gianni Bank Risk-Taking and Competition Revisited New Theory and New Evidence |
| title | Bank Risk-Taking and Competition Revisited New Theory and New Evidence |
| title_auth | Bank Risk-Taking and Competition Revisited New Theory and New Evidence |
| title_exact_search | Bank Risk-Taking and Competition Revisited New Theory and New Evidence |
| title_exact_search_txtP | Bank Risk-Taking and Competition Revisited New Theory and New Evidence |
| title_full | Bank Risk-Taking and Competition Revisited New Theory and New Evidence De Nicoló, Gianni |
| title_fullStr | Bank Risk-Taking and Competition Revisited New Theory and New Evidence De Nicoló, Gianni |
| title_full_unstemmed | Bank Risk-Taking and Competition Revisited New Theory and New Evidence De Nicoló, Gianni |
| title_short | Bank Risk-Taking and Competition Revisited |
| title_sort | bank risk taking and competition revisited new theory and new evidence |
| title_sub | New Theory and New Evidence |
| url | http://elibrary.imf.org/view/IMF001/00629-9781451865578/00629-9781451865578/00629-9781451865578.xml |
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