Competition, Financial Intermediation and Riskiness of Banks: Evidence from Asia Pacific
24 Pages Posted: 5 Feb 2015
Date Written: February 3, 2015
From a sample of commercial banks in Asia Pacific over the 1994-2009 period, this study highlights that banks in less competitive markets exhibit lower loan growth and higher instability. Such instability is further followed by a decline in deposit growth, suggesting that Asian banks are also subject to indirect market discipline mechanisms through bank competition. This study therefore sheds light on the importance of enhancing bank competition to overcome bank risk and strengthen financial intermediation. Likewise, this study advocates the importance of strengthening market discipline to reduce bank riskiness regardless of the degree of competition in the banking industry.
Keywords: Bank competition, loan growth, risk, market discipline, Asia Pacific
JEL Classification: G21, G28
Suggested Citation: Suggested Citation