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Impact of the Heterogeneity in Market Power on the Relationship Between Risk Taking and Competition: Case of the Chilean Banking Sector

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  • Gabriel Pino
  • Iván Araya

Abstract

Until the end of the 1990s, the existence of a negative relationship between banking competition and stability was generally accepted in the economic literature. Since then, a new point of view has emerged questioning this relationship and instead argues about the existence of a positive relationship between these two variables. This paper studies the impact of the heterogeneity in market power on this relationship through the case of the Chilean banking sector. The results indicate that this kind of heterogeneity can play an important role in the relationship between risk taking and competition.

Suggested Citation

  • Gabriel Pino & Iván Araya, 2013. "Impact of the Heterogeneity in Market Power on the Relationship Between Risk Taking and Competition: Case of the Chilean Banking Sector," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 49(4), pages 98-112, July.
    • Handle: RePEc:mes:emfitr:v:49:y:2013:i:4:p:98-112
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    Citations

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    Cited by:

    1. Gabriel Pino & Subhash C. Sharma, 2019. "On the Contagion Effect in the US Banking Sector," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(1), pages 261-280, February.
    2. Pino, Gabriel & Herrera, Rodrigo & Rodríguez, Alejandro, 2019. "Geographical spillovers on the relation between risk-taking and market power in the US banking sector," The North American Journal of Economics and Finance, Elsevier, vol. 47(C), pages 351-364.
    3. Silva, Cinthya & Pino, Gabriel, 2021. "Does direction of the transmission of bank risk matter? An application to the Chilean banking sector," Finance Research Letters, Elsevier, vol. 38(C).
    4. Samangi Bandaranayake & Kuntal K. Das & Robert W. Reed, 2020. "Another Look At ‘Bank Competition And Financial Stability: Much Ado About Nothing’?," Journal of Economic Surveys, Wiley Blackwell, vol. 34(2), pages 344-371, April.
    5. Samangi Bandaranayake & Kuntal K. Das & W. Robert Reed, 2018. "A Replication of “Bank Competition and Financial Stability: Much Ado About Nothing?” (Journal of Economic Surveys, 2016)," Working Papers in Economics 18/18, University of Canterbury, Department of Economics and Finance.
    6. Bijoy Rakshit & Samaresh Bardhan, 2020. "Does Bank Competition Enhance or Hinder Financial Stability? Evidence from Indian Banking," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 9(special i), pages 75-102.
    7. Kasman, Saadet & Kasman, Adnan, 2015. "Bank competition, concentration and financial stability in the Turkish banking industry," Economic Systems, Elsevier, vol. 39(3), pages 502-517.
    8. Ibrahim, Mansor H. & Salim, Kinan & Abojeib, Moutaz & Yeap, Lau Wee, 2019. "Structural changes, competition and bank stability in Malaysia’s dual banking system," Economic Systems, Elsevier, vol. 43(1), pages 111-129.

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