Competition, Financial Intermediation and Riskiness of Banks: Evidence from Asia Pacific

24 Pages Posted: 5 Feb 2015

See all articles by Wahyoe Soedarmono

Wahyoe Soedarmono

Sampoerna University - Faculty of Business

Amine Tarazi

University of Limoges - Faculty of Law and Economic Science

Date Written: February 3, 2015

Abstract

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

Soedarmono, Wahyoe and Tarazi, Amine, Competition, Financial Intermediation and Riskiness of Banks: Evidence from Asia Pacific (February 3, 2015). Available at SSRN: https://ssrn.com/abstract=2560099 or http://dx.doi.org/10.2139/ssrn.2560099

Wahyoe Soedarmono (Contact Author)

Sampoerna University - Faculty of Business ( email )

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

Amine Tarazi

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

5 rue Felix Eboue
Limoges, 87000
France

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