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- Title
Competition, Efficiency, and Stability in Banking.
- Authors
Schaeck, Klaus; Cihák, Martin
- Abstract
We examine the effect of competition on banking stability using a new measure of competition based on the reallocation of profits from inefficient banks to efficient ones. In a sample ofEuropean Banks, we find that this measure does capture competition, that competition is stability-enhancing, and that the stability-enhancing effect of competition is greater for healthy banks than for fragile ones. Our results suggest that efficiency is the conduit through which competition contributes to stability and that regulators must condition policy on the health of existing banks.
- Subjects
EUROPE; ECONOMIC competition; ECONOMIC efficiency; ECONOMIC equilibrium; BANKING industry
- Publication
Financial Management (Wiley-Blackwell), 2014, Vol 43, Issue 1, p215
- ISSN
0046-3892
- Publication type
Article
- DOI
10.1111/fima.12010