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Bank Competition, Institution and Economic Development: Evidence from Asia during 1999-2007

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  • Wahyoe Soedarmono

    (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)

Abstract

From a sample of Asian countries over the period 1999-2007, this paper investigates the link between bank competition and economic development. In general, although banking market power has a U-shaped relationship with economic growth, banking market power tends to improve economic growth. However, the positive impact of banking market power on economic growth only occurs in agricultural sector, but not in industrial sector. It is also shown that higher banking market power in countries with greater economic freedom erodes overall economic growth and industrial growth. On the contrary, there is no significant relationship between banking market power and agricultural growth in countries with greater economic freedom. Therefore, when economic freedom increases and financial service investments come into a country, any policy to boost banking competition becomes necessary. In this phase, as well, industrial sector is more important than agricultural sector.

Suggested Citation

  • Wahyoe Soedarmono, 2010. "Bank Competition, Institution and Economic Development: Evidence from Asia during 1999-2007," Post-Print hal-00785074, HAL.
    • Handle: RePEc:hal:journl:hal-00785074
    Note: View the original document on HAL open archive server: https://unilim.hal.science/hal-00785074
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    References listed on IDEAS

    as
    1. Agoraki, Maria-Eleni K. & Delis, Manthos D. & Pasiouras, Fotios, 2011. "Regulations, competition and bank risk-taking in transition countries," Journal of Financial Stability, Elsevier, vol. 7(1), pages 38-48, January.
    2. Mitchell A. Petersen & Raghuram G. Rajan, 1995. "The Effect of Credit Market Competition on Lending Relationships," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(2), pages 407-443.
    3. Beck, Thorsten, 2008. "Bank competition and financial stability : friends or foes ?," Policy Research Working Paper Series 4656, The World Bank.
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    Cited by:

    1. Soedarmono, Wahyoe & Machrouh, Fouad & Tarazi, Amine, 2013. "Bank competition, crisis and risk taking: Evidence from emerging markets in Asia," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 23(C), pages 196-221.
    2. Raffaela Casciello & Marco Maffei & David A. Ziebart, 2024. "Regulatory and contextual factors influencing earnings and capital management decisions: evidence from the European banking sector," Review of Quantitative Finance and Accounting, Springer, vol. 63(1), pages 87-146, July.
    3. Pradhan, Rudra P. & Arvin, Mak B. & Nair, Mahendhiran & Bennett, Sara E., 2020. "Unveiling the causal relationships among banking competition, stock and insurance market development, and economic growth in Europe," Structural Change and Economic Dynamics, Elsevier, vol. 55(C), pages 74-87.
    4. Osuagwu, Eze, 2014. "Determinants of Bank Profitability in Nigeria," MPRA Paper 60948, University Library of Munich, Germany.
    5. Folorunsho M. Ajide, 2016. "Financial Innovation and Sustainable Development in Selected Countries in West Africa," Journal of Entrepreneurship, Management and Innovation, Fundacja Upowszechniająca Wiedzę i Naukę "Cognitione", vol. 12(3), pages 85-111.
    6. Jayakumar, Manju & Pradhan, Rudra P. & Dash, Saurav & Maradana, Rana P. & Gaurav, Kunal, 2018. "Banking competition, banking stability, and economic growth: Are feedback effects at work?," Journal of Economics and Business, Elsevier, vol. 96(C), pages 15-41.

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    More about this item

    Keywords

    Banking Competition; Economic Freedom; Economic Growth; Asia;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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