Does Banking System Transparency Enhance Bank Competition? Cross-Country Evidence

19 Pages Posted: 9 Sep 2014

See all articles by Irina Andrievskaya

Irina Andrievskaya

National Research University Higher School of Economics

Maria Semenova

National Research University Higher School of Economics

Date Written: September 8, 2014

Abstract

There seems to be a consensus among regulators and scholars that in order to improve the functioning of a banking system and to stimulate bank competition, it is necessary to raise the level of bank information transparency. However, empirical studies which examine the determinants of competition in the financial sector, the effect of competition on financial stability, or the relationship between transparency and bank stability, leave aside the link between transparency and competition. The aim of this paper is to fill this gap in the literature. To test the hypothesis that greater bank information disclosure is associated with lower market power and lower concentration in the banking system, we use country-level data covering 213 countries. The years under consideration are 1998, 2001, 2005 and 2010, which correspond to the years of the World Bank's Banking Regulation and Supervision Survey rounds. Our findings do not always support the conventional wisdom: countries with higher levels of transparency have lower levels of bank concentration, while the link between transparency and competition is less pronounced. The effect from information disclosure grows – for both concentration and market power – with an increase of bank credit risks.

Keywords: Banking system, transparency, competition, concentration.

JEL Classification: F01, G21, G28

Suggested Citation

Andrievskaya, Irina and Semenova, Maria, Does Banking System Transparency Enhance Bank Competition? Cross-Country Evidence (September 8, 2014). Higher School of Economics Research Paper No. WP BRP 35/FE/2014, Available at SSRN: https://ssrn.com/abstract=2493083 or http://dx.doi.org/10.2139/ssrn.2493083

Irina Andrievskaya

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

Maria Semenova (Contact Author)

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

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