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Market Structure and Financial Stability: Theory and Evidence

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  • AMENDOLA, Adalgiso

    (CELPE - Centre of Labour Economics and Economic Policy, University of Salerno - Italy)

  • BARRA, Cristian

    (CELPE - Centre of Labour Economics and Economic Policy, University of Salerno - Italy)

  • BOCCIA, Marinella

    (CELPE - Centre of Labour Economics and Economic Policy, University of Salerno - Italy)

  • PAPACCIO, Anna

    (CELPE - Centre of Labour Economics and Economic Policy, University of Salerno - Italy)

Abstract

This paper investigates on the relationship between market structure and financial stability. More in details, considering the profit-oriented commercial banks and mutual cooperative banks, this work presents both a theoretical and an empirical approach in order to test the above relationship. As to the theoretical framework a case of imperfect mixed-Cournot competition between the two types of agents and a form of credit risk are considered. Moreover, to empirically explore the link between competition and financial stability the analysis employs a parametric approach using the ABI data allowing banks’ information from 1994 to 2015. The overall results show a negative trade-off between concentration and financial stability. However, this result, in the theoretical model, is strictly dependent on mutual cooperative banks’ presence in the market.

Suggested Citation

  • AMENDOLA, Adalgiso & BARRA, Cristian & BOCCIA, Marinella & PAPACCIO, Anna, 2018. "Market Structure and Financial Stability: Theory and Evidence," CELPE Discussion Papers 156, CELPE - CEnter for Labor and Political Economics, University of Salerno, Italy.
    • Handle: RePEc:sal:celpdp:0156
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    1. Cristian Barra & Nazzareno Ruggiero, 2021. "The role of nonlinearity on the financial development–economic performance nexus: an econometric application to Italian banks," Empirical Economics, Springer, vol. 60(5), pages 2293-2322, May.

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    More about this item

    Keywords

    Market Structure; Bank’s Risk; Profitability; Financial Stability; U-shaped Relationship;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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