The Impact of Bank Concentration on Financial Distress: The Case of the European Banking System

Cipollini, Andrea; Fiordelisi, Franco

doi:10.2139/ssrn.1578718

The Impact of Bank Concentration on Financial Distress: The Case of the European Banking System

EMFI Working Paper No. 2 - 2009

25 Pages Posted: 2 Apr 2010

See all articles by Andrea Cipollini

Andrea Cipollini

University of Palermo - d/SEAS; Università degli studi di Modena e Reggio Emilia (UNIMORE) - Faculty of Business and Economics; Università degli studi di Modena e Reggio Emilia (UNIMORE) - Center for Research in Banking and Finance (CEFIN)

Franco Fiordelisi

University of Rome III - Department of Business Studies; Middlesex University - Business School

There are 2 versions of this paper

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

Cipollini, Andrea and Fiordelisi, Franco, The Impact of Bank Concentration on Financial Distress: The Case of the European Banking System (November 30, 2009). EMFI Working Paper No. 2 - 2009. Available at SSRN: https://ssrn.com/abstract=1578718 or http://dx.doi.org/10.2139/ssrn.1578718