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Credit Market Competition and Bank Capitalization

CEPR Discussion Paper No. DP16566

35 Pages Posted: 22 Sep 2021 Last revised: 9 Nov 2021

See all articles by Özlem Dursun-de Neef

Özlem Dursun-de Neef

Monash Business School - Department of Banking and Finance

Thomas Gehrig

University of Vienna

Multiple version iconThere are 2 versions of this paper

Date Written: September 2021

Abstract

We document that within regional U.S. mortgage markets an increase in competition exerts differential effects on banks with large and small market shares. Large market share banks reduce capitalization and increase risk taking as a response to an increase in the intensity of competition, while small market share banks enhance capitalization and reduce risk taking. These results are tied to market shares and not driven by bank size or the level of concentration within local regional markets.

Keywords: bank capital, Credit market competition, fragility, Risk Taking, stability

JEL Classification: D22, G21, L13

Suggested Citation

Dursun-de Neef, H. Özlem and Gehrig, Thomas, Credit Market Competition and Bank Capitalization (September 2021). CEPR Discussion Paper No. DP16566, Available at SSRN: https://ssrn.com/abstract=3928880

H. Özlem Dursun-de Neef (Contact Author)

Monash Business School - Department of Banking and Finance ( email )

Melbourne
Australia

Thomas Gehrig

University of Vienna ( email )

Oskar-Morgenstern-Platz 1
Vienna, A-1090
Austria

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