Bank Competition and Financial Stability: Evidence from the Financial Crisis

Akins, B and Li, L and Ng, J and Rusticus, T (2016) Bank Competition and Financial Stability: Evidence from the Financial Crisis. Journal of Financial and Quantitative Analysis, 51 (1). pp. 1-28. ISSN 0022-1090

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Abstract

We examine the link between bank competition and financial stability using the recent financial crisis as the setting. We utilize variation in banking competition at the state level and find that banks facing less competition are more likely to engage in risky activities, more likely to face regulatory intervention, and more likely to fail. Focusing on the real estate market, we find that states with less competition had higher rates of mortgage approval, experienced greater inflation in housing prices before the crisis, and experienced a steeper decline in housing prices during the crisis. Overall, our study is consistent with greater competition increasing financial stability.

Item Type: Article
Additional Information: © 2016 Michael G. Foster School of Business, University of Washington
Subjects: C > Competition
Subject Areas: Accounting
DOI: 10.1017/S0022109016000090
Date Deposited: 07 Dec 2016 11:32
Last Modified: 07 Dec 2016 11:32
URI: http://lbsresearch.london.edu/id/eprint/762

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