Thursday, March 28, 2013
Posted by D. Daniel Sokol
Hong Liu, University of Glasgow - Glasgow Business School, Philip Molyneux, Bangor University, Bangor Business School and John O.S. Wilson, University of St. Andrews explore Competition and Stability in European Banking: A Regional Analysis.
ABSTRACT: National measures of competition and macroeconomic activity have traditionally been used to examine performance and risk features across banks. Such measures may be inappropriate in cases where banks operate with a regional focus. In this paper we construct measures of competition and economic activity using regional data to examine bank stability in 10 European countries over the period 2000–8. The results suggest that an inverted U‐shaped relationship exists between regional bank competition and stability. Regional economic conditions are also found to play a significant role in determining the stability of European banks.