Capital Market Regimes and Bank Competition in Europe
Journal of Money, Credit and Banking, [42, 6], 1073–1092
Posted: 14 Sep 2007 Last revised: 27 Aug 2014
Date Written: September 2010
Abstract
We hypothesize that national differences in capital market regimes influence competitive outcomes within European banking. Using bank-level data from 13 European countries, 1998 to 2004, we find that equity market development and shareholder protection are related to bank capitalization and that publicly listed independent banks utilize higher equity capitalization than their respective unlisted counterparts. These capital market regime factors also exert a positive influence on bank asset growth and significantly influence banks' allocations of assets between customer lending and wholesale activities. This suggests the existence of complementarities between bank-based and market-based financial systems that previous research has overlooked.
Keywords: international banking, market integration, shareholder protection
JEL Classification: F33, F36, G21, G28, G32, G38
Suggested Citation: Suggested Citation