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Year 2015, Volume: 4 Issue: 3, 0 - 0, 29.09.2015

Abstract

References

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  • Industry: An Application of the Panzar-Rosse Model,” Journal of Business and Management 11, 131-145. • Allen, F., and D. Gale, 2000, “Financial Contagion,” The Journal of Political Economy 108(1), 1-33.
  • • Allen, F., and D. Gale, 2004, “Competition and Financial Stability,” Journal of
  • Money, Credit and Banking 26(3), 453-480. • Altunbas, Y., S. Carbo, E. P. M. Gardener, and P. Molyneux, 2007, “Examining the Relationships Between Capital, Risk and Efficiency in European Banking,”
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  • Developing Countries,” Journal of Banking and Finance 34(4), 765–775. • Baltagi, B., 2001, Econometric Analysis of Panel Data UK: John Wiley & Sons Ltd., 2nd Ed.
  • • Beck, T., and R. Levin, 2004, “Stock Markets, Banks, and Growth: Panel Evidence,”
  • Journal of Banking and Finance 28(3), 423 – 442. • Beck, T., A. Demirguc-Kunt, and R. Levine, 2006, “Bank Concentration,
  • Competition, and Crises: First Results,” Journal of Banking and Finance 30(5), 1581-1603.
  • • Berger, A. N., L. Klapper,,and R. Turk-Ariss, 2009, “Bank Competition and Financial
  • Stability,” Journal of Financial Services 35( 2), 99-118. • Besanko, D., and A.V. Thakor, 1993, “Relationship Banking, Deposit Insurance and Bank Portfolio,” In: Capital Market and Financial Intermediation, edited by
  • Mayer, C., and X. Vives, 262–265. Cambridge, UK: Cambridge University Press. • Bikker, J. A., and K. Haaf, 2002, “Competition, Concentration and Their
  • Relationship: An Empirical Analysis of the Banking Industry,” Journal of Banking and Finance 26, 2191–2214.
  • • Blundell, R., and S. Bond, 1998, “Initial Conditions and Moment Restrictions in
  • Dynamic Panel Data Models,” Journal of Econometrics 87, 115–143. • Bofondi, M., and G. Gobbi, 2004, “Bad Loans and Entry Into Local Credit Markets,”
  • Temi di Discussione del Servizio Studi 509, Bank of Italy. • Bongini, P., L. Laeven,and G. Majnoni, 2002, “How Good is the Market at
  • Assessing Bank Fragility? A Horse Race Between Different Indicators,” Journal of Banking and Finance 26, 1011–1028.
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  • • Carbo, S., D. Humphrey, J. Maudos, and P. Molyneux, 2009, “Cross-Country
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  • Markets,” The Quarterly Journal of Economics 116 (2), 489–517. • Cho, Y.J, 1986, “Inefficiencies from Financial Liberalization in the Absence of Well
  • Functioning Equity Markets,” Journal of Money, Credit and Banking 26(2), 341– 3 • Claessens, S., and L. Laeven. 2004, “What Drives Bank Competition? Some
  • International Evidence,” Journal of Money, Credit and Banking 36, 563–84. • Cordella, T., and E. L. Yeyati, 2002, “Financial Opening, Deposit Insurance, and Risk in A Model of Banking Competition,” European Economic Review 46, 471-485.
  • • De Bandt, O., and E. P. Davis, 2000, “Competition, Contestability and Market
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  • Consolidation, Internationalization and Conglomeration: Trends and Implications for Financial Risk,” Financial Markets, Institutions and Instruments 13, 173–217. • De Nicolo, G., and E. Loukoianova, 2007, “Bank Ownership, Market Structure and Risk,” Monetary Fund Working Paper: 07/215.
  • • Demirguc-Kunt, A., L. Laeven, and R. Levine, 2004, “Regulations, Market
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  • • Dickey, D. A., and W.A. Fuller, 1979, “Distribution of The Estimators for
  • Autoregressive Time Series with a Unit Root,” Journal of the American Statistical Association 74, 427–431. • Dornbush, R., and A. Reynoso, 1989, “Financial Factors in Economic
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  • Emerging Banking Systems,” Emerging Markets Review 5, 39–59. • Goddard, J., and J. O. S. Wilson, 2009, “Competition in Banking: A Disequilibrium
  • Approach,” Journal of Banking and Finance 32, 2282-2292.
  • • Gonzalez, F., 2005, “Bank Regulation and Risk-Taking Incentives: An International
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  • • Hellmann, T.F., K.C. Murdock, and J.E. Stiglitz, 2000, “Liberalization, Moral Hazard in Banking, and Prudential Regulation: Are Capital Requirements Enough?”
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  • Note: *,** and *** denotes statistical significance at the 1%, 5% and 10% level, respectively.

BANK COMPETITION, CONCENTRATION AND RISK-TAKING IN THE TURKISH BANKING INDUSTRY

Year 2015, Volume: 4 Issue: 3, 0 - 0, 29.09.2015

Abstract

This paper addresses the impacts of bank competition on the risk-taking behaviors of banks in Turkey over the period 2002-2012. After estimating H-statistic as a measure of competition and regressing this measure and other explanatory variables on the bank risk indicators, this paper concludes that competition has a negative impact on the financial fragility of Turkish banks, indicating that banks in a more competitive market tend to take lower level of risk. This finding supports the arguments of the “competition-stability” hypothesis in the Turkish banking system. Furthermore, bank concentration is found to be inversely related to bank risk. On the one hand, bank size, lending, liquidity, off-balance sheet activities are essential factors in explaining this relationship. On the other hand, a few instrumental variables are employed to reflect the country’s overall macroeconomic condition.  In general, despite the negative impact of interest rate on bank risk-taking behavior in most of the models, in which different risk measures are used as dependent variables, the result highlights the empirical evidence of no significant association between economic growth and bank risk-taking. Overall, this paper aims to provide policy implications for bank management and consolidation policies and also the role of the Central Bank.

References

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  • • Allen, F., and D. Gale, 2004, “Competition and Financial Stability,” Journal of
  • Money, Credit and Banking 26(3), 453-480. • Altunbas, Y., S. Carbo, E. P. M. Gardener, and P. Molyneux, 2007, “Examining the Relationships Between Capital, Risk and Efficiency in European Banking,”
  • European Financial Management 13, 49–70. • Arellano, M., and S. Bond, 1991, “Some Tests of Specification for Panel Data:
  • Monte Carlo Evidence and an Application to Employment Equations,” Review of Economic Studies 58, 277–297. • Arellano, M., and O. Bover, 1995, “Another Look at the Instrumental Variable
  • Estimation of Error-Components Models,” Journal of Econometrics 68, 29–51. • Ariss, R.T., 2010, “On the Implications of Market Power in Banking: Evidence from
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  • Journal of Banking and Finance 28(3), 423 – 442. • Beck, T., A. Demirguc-Kunt, and R. Levine, 2006, “Bank Concentration,
  • Competition, and Crises: First Results,” Journal of Banking and Finance 30(5), 1581-1603.
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  • Stability,” Journal of Financial Services 35( 2), 99-118. • Besanko, D., and A.V. Thakor, 1993, “Relationship Banking, Deposit Insurance and Bank Portfolio,” In: Capital Market and Financial Intermediation, edited by
  • Mayer, C., and X. Vives, 262–265. Cambridge, UK: Cambridge University Press. • Bikker, J. A., and K. Haaf, 2002, “Competition, Concentration and Their
  • Relationship: An Empirical Analysis of the Banking Industry,” Journal of Banking and Finance 26, 2191–2214.
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  • Temi di Discussione del Servizio Studi 509, Bank of Italy. • Bongini, P., L. Laeven,and G. Majnoni, 2002, “How Good is the Market at
  • Assessing Bank Fragility? A Horse Race Between Different Indicators,” Journal of Banking and Finance 26, 1011–1028.
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  • • Carbo, S., D. Humphrey, J. Maudos, and P. Molyneux, 2009, “Cross-Country
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  • • De Nicolo, G., 2000, “Size, Charter Value and Risk in Banking: An International
  • Perspective,” International Finance Discussion 689, Board of Governors of the Federal Reserve System. • De Nicolo, G., P. Bartholomew, J. Zaman, and M. Zephirin, 2004, “Bank
  • Consolidation, Internationalization and Conglomeration: Trends and Implications for Financial Risk,” Financial Markets, Institutions and Instruments 13, 173–217. • De Nicolo, G., and E. Loukoianova, 2007, “Bank Ownership, Market Structure and Risk,” Monetary Fund Working Paper: 07/215.
  • • Demirguc-Kunt, A., L. Laeven, and R. Levine, 2004, “Regulations, Market
  • Structure, Institutions, and the Cost of Financial Intermediation,” Journal of Money, Credit and Banking 36, 593–622. • Demsetz, R. S., and P. E. Strahan, 1997, “Diversification, Size, and Risk at Bank
  • Holding Companies,” Journal of Money, Credit and Banking 29, 300–313. • Demsetz, R.S., M.R. Saidenberg, and P.E. Strahan, 1996, “Banks with Something to
  • Lose: the Disciplinary Role of Franchise Value,” FRBNY Economic Policy Review October,1–14. • Dick, A., 2006, “Nationwide Branching and Its Impact on Market Structure, Quality and Bank Performance,” Journal of Business 79, 567–592.
  • • Dickey, D. A., and W.A. Fuller, 1979, “Distribution of The Estimators for
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  • Development,” American Economic Review 79(2), 204–209. • Foos, D., L. Norden, and M. Weber, 2010, “Loan Growth and Riskiness of Banks,”
  • Journal of Banking and Finance 34(12), 2929-2940.
  • • Fry, M.J., 1988, “Money. Interest and Banking in Economic Development,”
  • Baltimore: The John Hopkins University Press, • Fungáčová, Z., and L. Weill, 2009, “How Market Powers Influences Bank Failures:
  • Evidence from Russia,” Working Paper, Bank of Finland. • Furlong, F.T., and M.C. Keeley, 1989, “Bank Capital Regulation and Risk Taking: A
  • Note,” Journal of Banking and Finance 13, 883–891. • Gelos, R. G., and J. Roldos, 2004, “Consolidation and Market Structure in
  • Emerging Banking Systems,” Emerging Markets Review 5, 39–59. • Goddard, J., and J. O. S. Wilson, 2009, “Competition in Banking: A Disequilibrium
  • Approach,” Journal of Banking and Finance 32, 2282-2292.
  • • Gonzalez, F., 2005, “Bank Regulation and Risk-Taking Incentives: An International
  • Comparison of Bank Risk” Journal of Banking and Finance 29, 1153–1184.
  • • Hellmann, T.F., K.C. Murdock, and J.E. Stiglitz, 2000, “Liberalization, Moral Hazard in Banking, and Prudential Regulation: Are Capital Requirements Enough?”
  • American Economic Review 90(1), 147–165. • Hong L., and J.O.S. Wilson, 2012, Competition and Risk in Japanese Banking,” The European Journal of Finance, DOI:10.1080/1351847X.2011.633614.
  • • Hong L., P. Molyneux, and L. H. Nguyen, 2012, “Competition and Risk in South
  • East Asian Commercial Banking,” Applied Economics 44(28), 3627-3644.
  • • Im, K. S., M. H. Pesaran, and Y. Shin, 2003, “Testing for unit roots in heterogeneous panels,” Journal of Econometrics 115(1), 53-74.
  • • Jayaratne, J., and P.E. Strahan, 1998, “Entry Restrictions, Industry Evolution, and Dynamic Efficiency: Evidence from Commercial Banking,” Journal of Law and Economics April (XLI), 239–273.
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  • Risk-taking?” .Journal of Financial stability 9, 185-195. • Jimenez, G., J.A. Lopez, and J. Saurina, 2008, “How Does Competition Impact
  • Bank Risk Taking” Working Paper. Bank of Spain. • Kashyap, A.K., J.C. Stein, and D.W Wilcox. 1993. “Monetary Policy and Credit
  • Conditions: Evidence from the Composition of External Finance.” The American Economic Review 83(1): 78-98. • Keeley, M.C., 1990, “Deposit Insurance, Risk and Market Power in Banking,”
  • American Economic Review 80, 1183–1200.
  • • Koetter, M., and T. Poghosyan, 2009, “The Identification of Technology Regimes in
  • Banking: Implications for the Market Power-Financial Fragility Nexus,” Journal of Banking and Finance 33, 1413-1422.
  • • Köhler, M., 2012, “Which Banks are More Risky? The Impact of Loan Growth and Business Model on Bank Risk-taking,” Deutsche Bundesbank Discussion Paper: 33/20
  • • Laven, L., 2006, “Banking Sector Performance in East Asian Countries: The Effects of Competition, Diversification, And Ownership. A background paper for ‘East
  • Asian Finance: The Road to Robust Markets,” Mimeo, World Bank. • Laven, L., and G. Majoni, 2003, “Loan Loss Provisioning and Economic
  • Slowdowns: Too Much, Too Late?,” Journal of Financial Intermediation 12, 178- 1
  • • Levin, A., C. Lin, and C. James Chu., 2002, “Unit Root Tests in Panel Data:
  • Asymptotic and Finite-Sample Properties,” Journal of Econometrics 108(1), 1-24. • Marcus, A.J., 1984, “Deregulation and Bank Financial Policy,” Journal of Banking and Finance 8, 557–565.
  • • Marquez, R. 2002, “Competition, Adverse Selection, and Information Dispersion in the Banking Industry,” Review of Financial Studies 15, 901–926.
  • • Martinez-Miera, D., and R. Repullo, 2010, “Does Competition Reduce the Risk of
  • Bank Failure?,” Review of Financial Studies 23(10), 3638–3664.
  • • Matutes, C., and X. Vives, 1996, “Competition for Deposits, Fragility, and Insurance,” Journal of Financial Intermediation 5, 184-216.
  • • Matutes, C., and X. Vives, 2000, “Imperfect Competition, Risk Taking and Competition in Banking,” European Economic Review 44, 1–34.
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Journal Section Articles
Authors

Gulin Vardar

Publication Date September 29, 2015
Published in Issue Year 2015 Volume: 4 Issue: 3

Cite

APA Vardar, G. (2015). BANK COMPETITION, CONCENTRATION AND RISK-TAKING IN THE TURKISH BANKING INDUSTRY. Journal of Business Economics and Finance, 4(3). https://doi.org/10.17261/Pressacademia.2015313139

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