Journal
JOURNAL OF BANKING & FINANCE
Volume 33, Issue 7, Pages 1299-1311Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.jbankfin.2009.01.006
Keywords
Market structure; Financial stability; Banking regulation
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Using aggregate balance sheet data from banks across the EU-25 over the period from 1997 to 2005 we provide empirical evidence that national banking market concentration has a negative impact on European banks' financial soundness as measured by the Z-score technique while controlling for macroeconomic, bank-specific, regulatory, and institutional factors. Furthermore, our analysis reveals that Eastern European banking markets exhibiting a lower level of competitive pressure, fewer diversification opportunities and a higher fraction of government-owned banks are more prone to financial fragility whereas capital regulations have supported financial stability across the entire European Union. (C) 2009 Elsevier B.V. All rights reserved.
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