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- Title
BANK COMPETITION, CONCENTRATION AND RISK-TAKING IN THE UAE BANKING INDUSTRY.
- Authors
MAGHYEREH, AKTHAM I.
- Abstract
This paper investigates the impact of competition and concentration on bank stability or risktaking behavior in the UAE banking industry over the period 2006 to 2015. The Herfindahl- Hirschmann (HHI) index is used as an inverse measure of competition, while the nonperforming loans (NPL) ratio and Z-scores are used as proxies for bank risk-taking. The impact of competition is derived from a dynamic panel specification that accounts for bank-level factors (size, efficiency, liquidity, and capitalization). Using the two-step system Generalized Method of Moments (GMM) estimates, our empirical results suggest that the increase in competition erodes banks' charter value and increases their tendency to assume additional risks with associated negative repercussions on financial stability. These results strongly support the competition-fragility hypothesis for UAE banks.
- Subjects
UNITED Arab Emirates; BANKING industry; RISK management in business; NONPERFORMING loans; HERFINDAHL-Hirschman index; GENERALIZED method of moments
- Publication
International Economics / Economia Internazionale, 2018, Vol 71, Issue 2, p129
- ISSN
0012-981X
- Publication type
Article