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Creditor rights, bank competition, and stability: International evidence

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  • González, Francisco

Abstract

The paper exploits changes in bankruptcy laws in 15 countries to analyze the effect of creditor rights on bank competition and stability. I find that stronger creditor rights in bankruptcy increase bank competition, especially in countries with less stringent restrictions on bank entry and non-traditional bank activities. The increase in bank competition lowers bank stability and counteracts other positive effects of stronger creditor rights on bank stability through higher recovery rates. Empirical analysis controls for changes in creditor rights outside bankruptcy and the results are robust to alternative specifications, alternative sample definitions, and omitted variables and endogeneity controls.

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  • González, Francisco, 2023. "Creditor rights, bank competition, and stability: International evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:intfin:v:82:y:2023:i:c:s1042443122001834
    DOI: 10.1016/j.intfin.2022.101711
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    More about this item

    Keywords

    Bankruptcy; Bank competition; Bank stability; Creditor rights;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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