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- DOI
- 10.1596/1813-9450-8615
- Publisher site
- See Book on Publisher Site
Abstract
Theory suggests that the effect of banking market concentr - a increasing concentration improves banking system stability tion on financial stability is mediated by several competing via profitability . At higher levels of concentration, incr - eas variables. Using a sample of 68 countries from 1997 to ing concentration makes the banking system more fragile 2015, this paper proposes a unified empirical framework because of the cost of credit, diversification and the ease of to test for the simultaneous presence and impact of the monitoring. For intermediate levels, concentration has no mediators through which concentration is expected to significant effect on financial stability, as the competing impact financial stability. The results indicate that the moderators cancel each other out. The results suggest that magnitude and net effect of the mediators depend upon an intermediate level of concentration may be optimal for the level of concentration. At lower levels of concentration, welfare.. This paper is a product of the Finance, Competitiveness and Innovation Global Practice. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also
Published: Oct 1, 2018