We explore the relationship between bank performances and financial stability of the banking system taking into account the Italian context during the period 2001-2014 and relying upon highly territorially disaggregated data taken at municipality level, in order to better capture the differences across geographical areas. The z-score is used as financial stability indicator, while the performance of financial intermediaries is measured using a parametric method recently developed (Kumbhakar et al., 2014). By focusing both on cooperative and non-cooperative banks, the role of the market power, measured through a bank specific market share based on loans, deposits and assets, on the performances-stability nexus has been analyzed. The empirical evidence shows a positive relationship between bank performance and financial stability; furthermore, we provide evidence in line with the “competition-stability” view for cooperative banks while supporting the “competition-fragility” view for non-cooperative banks. Robustness checks have been performed in order to explore whether the results change at different level of concentration of the banking system.

Bank Performance, Financial Stability and Market Competition: do Cooperative and Non-Cooperative Banks Behave Differently?

Cristian Barra;Roberto Zotti
2017

Abstract

We explore the relationship between bank performances and financial stability of the banking system taking into account the Italian context during the period 2001-2014 and relying upon highly territorially disaggregated data taken at municipality level, in order to better capture the differences across geographical areas. The z-score is used as financial stability indicator, while the performance of financial intermediaries is measured using a parametric method recently developed (Kumbhakar et al., 2014). By focusing both on cooperative and non-cooperative banks, the role of the market power, measured through a bank specific market share based on loans, deposits and assets, on the performances-stability nexus has been analyzed. The empirical evidence shows a positive relationship between bank performance and financial stability; furthermore, we provide evidence in line with the “competition-stability” view for cooperative banks while supporting the “competition-fragility” view for non-cooperative banks. Robustness checks have been performed in order to explore whether the results change at different level of concentration of the banking system.
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11386/4710945
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