Anginer, DenizDemirguc-Kunt, AsliZhu, Min2012-03-192012-03-192012-02-01https://hdl.handle.net/10986/3267Using bank level measures of competition and co-dependence, the authors show a robust positive relationship between bank competition and systemic stability. Whereas much of the extant literature has focused on the relationship between competition and the absolute level of risk of individual banks, they examine the correlation in the risk taking behavior of banks, hence systemic risk. They find that greater competition encourages banks to take on more diversified risks, making the banking system less fragile to shocks. Examining the impact of the institutional and regulatory environment on systemic stability shows that banking systems are more fragile in countries with weak supervision and private monitoring, with generous deposit insurance and greater government ownership of banks, and public policies that restrict competition. Furthermore, lack of competition has a greater adverse effect on systemic stability in countries with low levels of foreign ownership, weak investor protections, generous safety nets, and where the authorities provide limited guidance for bank asset diversification.CC BY 3.0 IGOACCESS TO FINANCIAL SERVICESACCOUNTINGADVERSE EFFECTAMOUNT OF CAPITALASSET DIVERSIFICATIONASSET PRICEASSET PRICESASSET VALUEASSET VALUESASSETS RATIOAUSTRIAN NATIONAL BANKBALANCE SHEETBANK ACTIVITIESBANK ASSETBANK ASSETSBANK CAPITALBANK COMPETITIONBANK CREDITBANK ENTRYBANK HOLDINGBANK HOLDING COMPANIESBANK INVESTORSBANK MARKETBANK POLICYBANK PROFITABILITYBANK REGULATIONBANK RISKBANK RISK TAKINGBANK RUNSBANK SUPERVISIONBANKING ASSETSBANKING CONCENTRATIONBANKING CRISISBANKING INDUSTRIESBANKING SECTORBANKING STRUCTUREBANKING SYSTEMBANKING SYSTEMSBANKRUPTCYBANKSBOOK VALUEBORROWINGBUSINESS CYCLECALL OPTIONCAPITAL REGULATIONCAPITAL REQUIREMENTSCAPITALIZATIONCDSCHANNELS OF CREDITCHECKSCOMMERCIAL BANKSCOMPETITION POLICIESCOMPETITION POLICYCOMPETITIVE MARKETSCONNECTIVITYCORPORATE DEBTCOUNTRY FIXED EFFECTCOUNTRY FIXED EFFECTSCREDIT ALLOCATIONCREDIT CRUNCHCREDIT INFORMATIONCREDIT MARKETCREDIT MARKETSCREDIT RISKDEBTDEFAULT PROBABILITIESDEFAULT PROBABILITYDEFAULT RISKDEFAULT RISKSDEPOSITDEPOSIT INSURANCEDEPOSIT INSURANCE COVERAGEDEPOSIT MONEY BANKSDEPOSITSDEREGULATIONDIVIDENDDIVIDEND RATEDUMMY VARIABLEECONOMIC DEVELOPMENTECONOMIC STABILITYECONOMICSEMERGING MARKETSENTRY BARRIERSENTRY REQUIREMENTSEQUITY RETURNSEQUITY VALUEEXCLUSIONEXIT POLICIESEXPOSUREEXPOSURE TO RISKFACE VALUEFEDERAL RESERVEFEDERAL RESERVE BANKFEDERAL RESERVE BANK OF NEW YORKFEE INCOMEFINANCIAL CONTAGIONFINANCIAL CRISESFINANCIAL CRISISFINANCIAL DEVELOPMENTFINANCIAL FRAGILITYFINANCIAL INFORMATIONFINANCIAL INNOVATIONSFINANCIAL INSTITUTIONFINANCIAL INSTITUTIONSFINANCIAL INTERMEDIATIONFINANCIAL POLICYFINANCIAL PRODUCTSFINANCIAL SECTORFINANCIAL SERVICESFINANCIAL STABILITYFINANCIAL STRUCTUREFINANCIAL STUDIESFINANCIAL SYSTEMFINANCIAL SYSTEMSFOREIGN BANKFOREIGN ENTRYFOREIGN INVESTORSFOREIGN OWNERSHIPFOREIGN OWNERSHIP OF BANKSGLOBAL BANKINGGLOBAL BUSINESSGLOBAL MARKETGLOBAL STOCK MARKETGLOBALIZATIONGOVERNMENT OWNERSHIPGOVERNMENT OWNERSHIP OF BANKSGOVERNMENT POLICIESGROUP OF BANKGROWTH RATEIMPLICIT GUARANTEEINFORMATION ASYMMETRYINFORMATION ON BORROWERSINFORMATION SHARINGINPUT PRICESINSTITUTIONAL ENVIRONMENTINTEREST EXPENSESINTEREST INCOMEINTEREST RATESINTERNATIONAL BANKINTERNATIONAL BANKSINTERNATIONAL FINANCIAL SYSTEMINTERPOLATIONINVESTOR PROTECTIONLACK OF COMPETITIONLEVEL OF RISKLEVELS OF CREDITLIBERALIZATIONLIQUIDITYLOANLOAN DEFAULTSLOAN LOSS PROVISIONSLOAN MARKETLOW ENTRY BARRIERMARGINAL COSTMARKET COMPETITIONMARKET DISCIPLINEMARKET EQUITYMARKET INFORMATIONMARKET INTEGRATIONMARKET LIQUIDITYMARKET VALUEMONEY MARKETMORAL HAZARDNEW MARKETSOPERATING EXPENSESOPERATING INCOMEOUTPUTPERSONNEL EXPENSESPORTFOLIOSPRIVATE BANKSPRIVATE CREDITPRIVATE SECTOR DEVELOPMENTPROBABILITY OF DEFAULTPROFITABILITYPROFITABILITY MEASURESPRUDENTIAL REGULATIONPUBLIC POLICIESPUBLIC POLICYREAL ESTATEREGULATORSREGULATORY AUTHORITIESREGULATORY ENVIRONMENTREGULATORY FRAMEWORKRETURNRETURN ON ASSETSRISK DIVERSIFICATIONRISK OF BANK FAILURERISK SHARINGRISK TAKINGSAFETY NETSAFETY NETSSECURITIESSHARE OF ASSETSSHAREHOLDERSMALL BANKSSOURCES OF CREDITSTATE GUARANTEESSTOCK MARKETSTOCK MARKET CAPITALIZATIONSTOCK MARKETSSTOCK PRICESTOCK RETURNSUPERVISORY AUTHORITIESSUPERVISORY POWERSUPERVISORY POWERSSUPERVISORY POWERSYNCHRONOUS STOCK PRICE MOVEMENTSSYSTEMIC BANKING CRISESSYSTEMIC RISKTRADINGTRADING INCOMETREASURYTREASURY YIELDVALUE OF ASSETSVOLATILITYWorld Bank10.1596/1813-9450-5981