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The Impact of Bank Competition and Institutional Quality on Bank Stability: International Evidence

Author

Listed:
  • Yudaruddin Rizky

    (Faculty of Economics and Business, Mulawarman University, Samarinda, Indonesia Mulawarman)

  • Ulfah Yana

    (Faculty of Economics and Business, Mulawarman University, Samarinda, Indonesia Mulawarman)

  • Lesmana Dadang

    (Research and Development Agency, East Kutai, Indonesia)

Abstract

This study aims to determine the effects of bank competition and institutional quality on bank stability. It also intends to examine the impact of competition and institutional quality on bank stability. The System Generalized Method of Moments (SYS-GMM) is used to analyze the sample, which comprises 127 countries selected from 79 developing and 48 developed countries from 1993 to 2017, based on the Global Financial Development and Worldwide Governance Indicators. The results show that competition has a negative effect, especially in developed countries. On the other hand, the institutional quality index significantly and positively influences bank stability. Furthermore, competition and institutional quality significantly affect bank stability, particularly in developed countries. This implies that increasing institutional quality encourages higher competition, improving bank stability.

Suggested Citation

  • Yudaruddin Rizky & Ulfah Yana & Lesmana Dadang, 2024. "The Impact of Bank Competition and Institutional Quality on Bank Stability: International Evidence," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 4, pages 767-780, December.
    • Handle: RePEc:nwe:eajour:y:2024:i:4:p:767-780
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    More about this item

    Keywords

    Bank Stability; Bank Competition; Institutional Quality;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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