Bank Market Power, Economic Growth and Financial Stability: Evidence from Asian Banks

Posted: 21 Jan 2012

See all articles by Wahyoe Soedarmono

Wahyoe Soedarmono

Sampoerna University - Faculty of Business

Fouad Machrouh

Higher Institute of Commerce and Business Administration

Amine Tarazi

University of Limoges - Faculty of Law and Economic Science

Date Written: 2011

Abstract

This paper examines whether Asian banks are still prone to moral hazard in the aftermath of the 1997 Asian crisis. Using a sample of commercial banks from 12 Asian countries during the 2001-2007 period,our empirical findings highlight that greater market power in the banking market results in higher instability. Although banks are better capitalized in less competitive markets their default risk remains higher. A deeper investigation however shows that such behaviour is dependent on the economic environment. Higher economic growth contributes to neutralize greater risk taking and higher instability in less competitive markets.

Keywords: Market power, financial fragility, economic growth, Asian banks

JEL Classification: G21, G28, L11

Suggested Citation

Soedarmono, Wahyoe and Machrouh, Fouad and Tarazi, Amine, Bank Market Power, Economic Growth and Financial Stability: Evidence from Asian Banks (2011). Journal of Asian Economics, Vol. 22, No. 6, 2011, Available at SSRN: https://ssrn.com/abstract=1988643

Wahyoe Soedarmono (Contact Author)

Sampoerna University - Faculty of Business ( email )

Jl. Raya Pasar Minggu, Kav. 16
Jakarta, Pancoran 12780
Indonesia

Fouad Machrouh

Higher Institute of Commerce and Business Administration ( email )

casablanca, 22000
Morocco

Amine Tarazi

University of Limoges - Faculty of Law and Economic Science ( email )

5 rue Felix Eboue
Limoges, 87000
France

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
580
PlumX Metrics