Price Competition, Efficiency and Riskiness in Investment Banking

26 Pages Posted: 20 Mar 2011

See all articles by Franco Fiordelisi

Franco Fiordelisi

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

Claudia Girardone

Essex Business School - University of Essex

Nemanja Radic

Cranfield University - School of Management

Date Written: March 14, 2011

Abstract

The recent financial crisis has shown that the stability of the investment banking industry plays a key role for the soundness of the financial system as a whole. Do high competition and/or cost inefficiencies increase investment banks’ insolvency (and capital) risks? Or, conversely, do investment banks’ insolvency risk and capitalization levels lead to higher price competition and/or lower cost efficiencies? Using a large sample of investment banks in ten large developed countries over 2000-2008, we show that price competition is rather limited in investment banking worldwide. Although investment banks’ stability was granted by relatively low competitive pressures, banks appeared prone to take more risk thus giving some support to the competition-stability view for the investment banking industry.

Keywords: D2, D24, G24

JEL Classification: Investment Banking, Price Competition, Risk, Capital, Efficiency

Suggested Citation

Fiordelisi, Franco and Girardone, Claudia and Radic, Nemanja, Price Competition, Efficiency and Riskiness in Investment Banking (March 14, 2011). Available at SSRN: https://ssrn.com/abstract=1786753 or http://dx.doi.org/10.2139/ssrn.1786753

Franco Fiordelisi (Contact Author)

University of Rome III - Department of Business Studies ( email )

Via Silvio D'Amico 77
Via Silvio D'Amico 77
Rome, RM 00145
Italy

HOME PAGE: http://host.uniroma3.it/docenti/fiordelisi/?home

Middlesex University - Business School ( email )

The Burroughs
London, NW4 4BT
United Kingdom

Claudia Girardone

Essex Business School - University of Essex ( email )

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom
+44 1206874156 (Phone)
+44 1206873429 (Fax)

HOME PAGE: http://www.essex.ac.uk/ebs/staff/profile.aspx?ID=1045

Nemanja Radic

Cranfield University - School of Management ( email )

Bedfordshire, MK43 0AL
United Kingdom

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