Discussion Paper

No. 2015-22 | March 26, 2015
Banking Concentration and Financial Stability: Evidence from Developed and Developing Countries

Abstract

In this paper, the authors analyze the relationship between banking concentration and financial stability for a sample of 173 developed and developing countries over the period 1980–2011. First, they empirically examined the direct effect of banking concentration on financial stability by using a panel logit model. Second, the authors investigated the indirect effect through which concentration may affect stability. Their findings provide support for the existence of both concentration-stability and concentration-fragility channels. However, the authors report the absence of any direct effect of banking concentration on the occurrence of financial stability in our sample. When considering heterogeneity across countries, their results help confirm the stabilizing effect of concentration on financial stability for developing countries. However, the concentration-fragility hypothesis does not hold for these countries. They also confirm the existence of both effects regarding concentration: the stabilizing and destabilizing effect of concentration on financial stability.

JEL Classification:

E31, E3, C33, P44

Assessment

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Links

Cite As

Mohamed Sami Ben Ali, Timoumi Intissar, and Rami Zeitun (2015). Banking Concentration and Financial Stability: Evidence from Developed and Developing Countries. Economics Discussion Papers, No 2015-22, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2015-22


Comments and Questions


Vighneswara Swamy - Banking concentration and financial stability.
March 27, 2015 - 09:57

I suggest the authors to consider employing a structural VAR model in their empirical investigation as it is better suited than GMM specifications.

If interested authors can refer the paper: Testing the interrelatedness of banking stability measures
available at: http://www.emeraldinsight.com/doi/abs/10.1108/JFEP-01-2013-0002


Anonymous - Invited Reader Comment
April 07, 2015 - 10:06

see attached file


SEIFALLAH Sassi - report
April 13, 2015 - 17:40

The topic the authors developed is very interesting. Financial instability is a main feature for many banking systems in developing and developed countries as well. The authors are addressing it from different angles and with many extensions. Therefore, the article is worth to be published in the E-economics journal.
Specific ...[more]

... comments on the paper’s analysis are as follows:
- The results reported by the authors are very important however they fail to summarizes them in the abstract. They should improve the abstract’s content.
- Laeven's data set investigate the incidence of crises in all 173 countries in your data? Authors should consider countries that were examined by Laeven et al.
-The effect of macro controls on the incidence of crises is likely to occur with a lag. Authors should examine the dynamics of these lagged influences.
- The authors should develop some policies implications for the study in the conclusion.


Mohamed Sami Ben Ali - Reply to all Reviewers
May 28, 2015 - 11:49

see attached file


Mohamed Sami Ben Ali - Revised Version
May 28, 2015 - 11:49

see attached file


Anonymous - Referee Report
July 01, 2015 - 12:07

see attached file


Mohamed Sami Ben Ali - Reply to Referee
September 28, 2015 - 09:42

see attached file


Mohamed Sami Ben Ali - Revised Version
September 28, 2015 - 09:47

see attached file