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Banking Concentration and Financial Stability. New Evidence from Developed and Developing Countries

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Abstract

In this paper, we analyze the relationship between banking concentration and financial stability for a sample of 156 developed and developing countries during the period 1980–2011. Our study first examines the direct effect of banking concentration on financial stability. The results provide evidence that concentration does not directly affect the stability of the financial system. The study also investigates two indirect channels and finds that concentration has a positive and stabilizing impact on financial stability through the profitability channel and a negative and destabilizing impact through the interest rate channel. When considering the level of development across countries, our results support the existence of a stabilizing effect of concentration on financial stability and the absence of a destabilizing interest channel for developing countries. Interestingly, our results also indicate that concentration has a direct and indirect effect on financial stability during crisis periods, but no direct effect on financial stability during normal periods.

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Authors and Affiliations

  1. College of Business and Economics, Qatar University, Doha, Qatar

    Mohamed Sami Ben Ali & Rami Zeitun

  2. Banque Nationale Agricole (BNA), Tunis, Tunisia

    Timoumi Intissar

Authors
  1. Mohamed Sami Ben Ali
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  2. Timoumi Intissar
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  3. Rami Zeitun
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Corresponding author

Correspondence to Mohamed Sami Ben Ali.

Appendices

Appendix A

Table A1

Table A1 Sample and sub-samples list of countries (156 countries)
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Appendix B

Table B2

Table B2 Descriptive statistics
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Ben Ali, M., Intissar, T. & Zeitun, R. Banking Concentration and Financial Stability. New Evidence from Developed and Developing Countries. Eastern Econ J 44, 117–134 (2018). https://doi.org/10.1057/eej.2016.8

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  • DOI: https://doi.org/10.1057/eej.2016.8

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