Bank Competition and Financial System Stability: A Simultaneous Equations Approach
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Abstract
This paper on reexamines the competition-stability nexus by applying the simultaneous equations technique on a sample of 81 countries including both developed and developing countries during the year 2000 to 2013. The results reveal that the proxies for bank competition from structural and non-structural approach have reverse effects on financial system stability. In addition, these proxies for bank competition do not only affect the financial system stability but also affect bank-specific variables, such as efficiency, revenue diversification and portfolio risk at the same time.
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