The Impact of Bank Concentration on Financial Distress: The Case of the European Banking System
23 Pages Posted: 16 Feb 2009
Date Written: February, 15 2009
This paper examines the impact of bank concentration on bank financial distress using a balanced panel of commercial banks belonging to EU 25 over the sample period running from 2003 to 2007. Financial distress is proxied by the observations falling below a given threshold of the empirical distribution of a risk adjusted indicator of bank performance: the Shareholder Value ratio. We employ a panel probit regression estimated by GMM in order to obtain consistent and efficient estimates following the suggestion of Bertschek and Lechner (1998). Our findings suggest, after controlling for a number of enviroment variables, a positive effect of bank concentration on financial distress.
Keywords: EVA, Banking, Panel Probit, GMM
JEL Classification: C33, C35, G21, G32
Suggested Citation: Suggested Citation