The Impact of Bank Concentration on Financial Distress: The Case of the European Banking System
25 Pages Posted: 2 Apr 2010
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The Impact of Bank Concentration on Financial Distress: The Case of the European Banking System
Date Written: November 30, 2009
Abstract
This paper examines the impact of bank concentrationon bank financial distress using a balanced panel of commercial banks in the EU‐25 over a 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 made by Bertschek and Lechner (1998). After controlling for a number of environment variables, we conclude that our findings suggest 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
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