International Transaction Journal of Engineering,
Management, & Applied Sciences & Technologies

FEATURE PEER-REVIEWED ARTICLE

• BANK COMPETITION AND STABILITY RELATIONSHIP: EVIDENCE FROM SELECTED ECONOMIES OF SOUTH ASIAN REGION

  Muhammad Amir Alvi, Amir Rafique (Department of Management Sciences COMSATS University Islamabad, PAKISTAN).
  

  Disciplinary: Banking, Finance and Management Sciences.

  (Backup file)

  DOI: 10.14456/ITJEMAST.2020.170

  Keywords: Bank concentration; Banking competition-fragility; Two-step system GMM; Z-score; Commercial banks; South Asian banking; Hirschman-Herfindahl index; Wu-Hausman test; Stability of banking; Levin-Lin-Chu test.

  Abstract
  This study explores the impact of bank competition on the stability of 88 banking institutions in four South Asian economies (Bangladesh, India, Pakistan and Sri Lanka) for 2012-2018. Both structure and non-structure measures of competition are used in empirical measurements along with z-score that is mostly used measure of stability. The results using two-step system generalized method of moment (GMM) suggests that structure measures of bank competition (Concentration ratio and Hirschman-Herfindahl index) have a significant positive impact on the stability of banks while non-structure measures of bank competition (Panzar and Rosse H statistics, Conventional, Adjusted Lerner index and Boone indicator) have a significant negative impact on the stability of banks. The results are strongly in the favour of competition-fragility hypothesis which proposes that an increase in competition reduces the stability of banking institutions in the financial market.
  
  Paper ID: 11A9H