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A note on efficiency and solvency in banking

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  • J. C. Reboredo

Abstract

Banking competition induces an efficient outcome but may also induce risk-taking behaviour that reduces solvency. This study examines the relationship between efficiency and solvency in banking at the empirical level. The empirical findings support that greater efficiency with respect to a risk-return frontier leads to a greater solvency level, but solvency is not related to efficiency. So, an increase in banking competition generates both more efficiency and solvency.

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  • J. C. Reboredo, 2004. "A note on efficiency and solvency in banking," Applied Economics Letters, Taylor & Francis Journals, vol. 11(3), pages 183-185.
    • Handle: RePEc:taf:apeclt:v:11:y:2004:i:3:p:183-185
    DOI: 10.1080/1350485042000203823
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    References listed on IDEAS

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    1. Joseph P. Hughes & William W. Lang & Loretta J. Mester & Choon-Geol Moon, 1996. "Efficient banking under interstate branching," Proceedings, Board of Governors of the Federal Reserve System (U.S.), pages 1045-1075.
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    Cited by:

    1. Burak Gunalp & Tuncay Celik, 2006. "Competition in the Turkish banking industry," Applied Economics, Taylor & Francis Journals, vol. 38(11), pages 1335-1342.

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