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Creditor rights and the market power-stability relationship in banking

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  • Biswas, Swarnava (Sonny)

Abstract

I use the staggered passage of creditor rights reforms in 13 countries to examine how changes in creditor rights affect (a) bank stability and (b) the bank market power-stability relationship. (a) There is statistically weak evidence that stronger creditor rights enhance bank stability; the result is not robust across specifications. (b) Market power positively affects stability. However, there is asymmetry in the effect of market power on stability, depending on whether there is an increase or a decrease in creditor rights. The market power-stability relationship is stronger when a country weakens its creditor rights vis-á-vis when it strengthens its creditor rights.

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  • Biswas, Swarnava (Sonny), 2019. "Creditor rights and the market power-stability relationship in banking," Journal of Financial Stability, Elsevier, vol. 40(C), pages 53-63.
    • Handle: RePEc:eee:finsta:v:40:y:2019:i:c:p:53-63
    DOI: 10.1016/j.jfs.2017.10.001
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    More about this item

    Keywords

    Bank risk-taking; Lerner index; Bank competition; Law and finance;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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