Journal
JOURNAL OF BANKING & FINANCE
Volume 101, Issue -, Pages 188-205Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.jbankfin.2019.02.007
Keywords
Systemic risk; Interbank correlation; Diversification; Competition
Categories
Funding
- Fondecyt Iniciacion [11150492]
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This paper revisits the mechanism behind the relation between bank competition and systemic risk. I decompose this risk into a component driven by banks' commonality with the market and a component arising from other sources of interbank commonality. I show that competition is negatively related to the latter. This relationship is stronger for more informationally opaque banks, financed with a larger share of uninsured sources and in countries with lower deposit insurance coverage. The findings are consistent with herding incentives at banks when competition is low. (C) 2019 Elsevier B.V. All rights reserved.
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