Perspective Contradiction Regarding Competition and Financial Stability in the Banking Sector: Review of Literature
Abstract
This study aims to provide a systematic literature review (SLR) on the scope, measurement, and impact of competition on banking stability. PRISMA technique was used to undertake a meta-analysis of scientific articles. After applying all of the criteria, a total of 42 relevant studies were discovered. Previous research has examined the relationship between banking stability and competition in a variety of countries around the world, and has produced two opposing viewpoints, namely competition fragility and competition stability. The first perspective gets more support. When it comes to the measurement instrument, most studies use the Lerner index to quantify the intensity of competition. It is also discovered that the GMM (Generalized Approach of Moment) approach is widely used. Future research can examine each indicator's strengths and weaknesses further so that it can be used to gauge banking competition in accordance with the banking systems examined in each nation, yielding reliable results.
Keywords: competition, stability, banking
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References
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Amidu, M., Coffie, W., & Sissy, A. M. (2019). The effects of market power on stability: Do diversification and earnings strategy matter?. Afro-Asian Journal of Finance and Accounting, 9(4), 381–405. https://doi.org/10.1504/AAJFA.2019.102994
Amidu, M., & Wolfe, S. (2013). Does bank competition and diversification lead to greater stability? Evidence from emerging markets. Review of Development Finance, 3(3), 152–166. https://doi.org/10.1016/j.rdf.2013.08.002
Anginer, D., Demirguc-Kunt, A., & Zhu, M. (2013). How does competition affect bank systemic risk? Journal of Financial Intermediation, 23(1), 1–26. https://doi.org/10.1016/j.jfi.2013.11.001
Ariss, R. T. (2010). On the implications of market power in banking: Evidence from developing countries. Journal of Banking and Finance, 34(4), 765–775. https://doi.org/10.1016/j.jbankfin.2009.09.004
Asif, R., & Akhter, W. (2019). Exploring the influence of revenue diversification on financial performance in the banking industry: A systematic literature review. Qualitative Research in Financial Markets, 11(3), 305–327. https://doi.org/10.1108/QRFM-04-2018-0057
Aulianto, D. R., Yusup, P. M., & Setianti, Y. (2019). Pemanfaatan Aplikasi “Publish Or Perish” Sebagai Alat Analisis Sitasi Pada Jurnal Kajian Komunikasi Universitas Padjadjaran. In Book Chapter Seminar Nasional MACOM III "Communication and Information Beyound Boundaries (pp. 873–880).
Bain, J. S. (1951). Relation of Profit Rate to Industry Concentration: American Manufacturing 1936-1940. The Quarterly Journal of Economics, 65(3), 293–324. https://doi.org/https://doi.org/10.2307/1882581
Barra, C., & Zotti, R. (2020). Market power and stability of financial institutions: evidence from the Italian banking sector. Journal of Financial Regulation and Compliance, 28(2), 235–265. https://doi.org/10.1108/JFRC-05-2019-0055
Baumol, W. J., Panzar, J. C., & Willig, R. D. (1983). An Uprising in the Theory of Industry Structure: Reply. The American Economic Review, 73(3), 491–496. https://www.jstor.org/stable/1808145
Beck, T., Jonge, O. De, & Schepens, G. (2011). Bank Competition and Stability: Reconciling Conflicting. Paolo Baffi Centre Reseach No. 2011-97. https://doi.org/http://dx.doi.org/10.2139/ssrn.1884150
Beck, T., Jonghe, O. De, & Schepens, G. (2012). Bank competition and stability: Cross-country heterogeneity. Journal of Financial Intermediation, 22(2), 218–244. https://doi.org/http://dx.doi.org/10.1016/j.jfi.2012.07.001
Bikker, J. A., & Haaf, K. (2002). Competition, concentration and their relationship: An empirical analysis of the banking industry. Journal of Banking & Finance, 26(11), 2191–2214. https://doi.org/https://doi.org/10.1016/S0378-4266(02)00205-4
Boyd, J. H., & De Nicoló, G. (2005). The theory of bank risk taking and competition revisited. Journal of Finance, 60(3), 1329–1343. https://doi.org/10.1111/j.1540-6261.2005.00763.x
Bresnaham, T. F., & Schmalensee, R. (1987). The Empirical Renaissance in Industrial Economics: An Overview. The Journal of Industrial Economics, 35(4), 371–378. https://doi.org/https://doi.org/10.2307/2098578
Claessens, S., & Laeven, L. (2004). What Drives Bank Competition? Some International Evidence. Journal of Money, Credit, and Banking, 36(3b), 563–583. https://doi.org/10.2307/3838954
Clark, E., Radić, N., & Sharipova, A. (2018). Bank competition and stability in the CIS markets. Journal of International Financial Markets, Institutions and Money, 54, 190–203. https://doi.org/10.1016/j.intfin.2017.12.005
Contreras, S., Delis, M. D., Ghosh, A., & Hasan, I. (2021). Bank failures, local business dynamics, and government policy. Small Business Economics, 58(4), 1823–1851. https://doi.org/10.1007/s11187-021-00478-5
Cuestas, J. C., Lucotte, Y., & Reigl, N. (2020). Banking sector concentration, competition and financial stability: the case of the Baltic countries. Post-Communist Economies, 32(2), 215–249. https://doi.org/https://doi.org/10.1080/14631377.2019.1640981
Danisman, G., & Thong, W. L. (2018). Overview of Competition in the Banking Sector. International Journal of Economics, Commerce and Management, VI(4), 59–71.
Danisman, G. O., & Demirel, P. (2019). Bank risk-taking in developed countries: The influence of market power and bank regulations. Journal of International Financial Markets, Institutions and Money, 59, 202–217. https://doi.org/10.1016/j.intfin.2018.12.007
Demsetz, R. S., & Strahan, P. E. (1997). Diversification, Size, and Risk at Bank Holding Companies. Journal of Money, Credit and Banking, 29(3), 300–313. https://doi.org/10.2307/2953695
Dwumfour, R. A. (2017). Explaining banking stability in Sub-Saharan Africa. Research in International Business and Finance, 41, 260–279. https://doi.org/10.1016/j.ribaf.2017.04.027
Fu, X. (Maggie), Lin, Y. (Rebecca), & Molyneux, P. (2014). Bank competition and financial stability in Asia Pacific. Journal of Banking and Finance, 38(1), 64–77. https://doi.org/10.1016/j.jbankfin.2013.09.012
Fungáčová, Z., & Weill, L. (2013). Does competition influence bank failures? Evidence from Russia. Economics of Transition, 21(2), 301–322. https://doi.org/10.1111/ecot.12013
Goetz, M. R. (2018). Competition and bank stability. Journal of Financial Intermediation, 35, 57–69. https://doi.org/10.1016/j.jfi.2017.06.001
Hamid, F. S. (2017). The Effect of Market Structure on Banks’ Profitability and Stability: Evidence from ASEAN-5 Countries. International Economic Journal, 31(4), 578–598. https://doi.org/10.1080/10168737.2017.1408668
Husaeni, D. F. A, & Nandiyanto, A. B. D. (2022). Bibliometric Using Vosviewer with Publish or Perish (using Google Scholar data): From Step-by-step Processing for Users to the Practical Examples in the Analysis of Digital Learning Articles in Pre and Post Covid-19 Pandemic. ASEAN Journal of Science and Engineering, 2(1), 19–46.
Hussain, M., & Bashir, U. (2020). Risk-competition nexus: Evidence from Chinese banking industry. Asia Pacific Management Review, 25(1), 23–37. https://doi.org/10.1016/j.apmrv.2019.06.001
Ibrahim, M. H., Salim, K., Abojeib, M., & Yeap, L. W. (2019). Structural changes, competition and bank stability in Malaysia’s dual banking system. Economic Systems, 43(1), 111–129. https://doi.org/10.1016/j.ecosys.2018.09.001
Jiménez, G., Lopez, J. A., & Saurina, J. (2013). How does competition affect bank risk-taking? Journal of Financial Stability, 9(2), 185–195. https://doi.org/10.1016/j.jfs.2013.02.004
Kanas, A., Hassan Al-Tamimi, H. A., Albaity, M., & Mallek, R. S. (2018). Bank competition, stability, and intervention quality. International Journal of Finance and Economics, 24(1), 568–587. https://doi.org/10.1002/ijfe.1680
Kasman, A., & Kasman, S. (2016). Bank size, competition and risk in the Turkish banking industry. Empirica, 43(3), 607–631. https://doi.org/10.1007/s10663-015-9307-1
Kasman, S., & Kasman, A. (2015). Bank competition, concentration and financial stability in the Turkish banking industry. Economic Systems, 39(3), 502–517. https://doi.org/10.1016/j.ecosys.2014.12.003
Keeley, M. C. (1990). Deposit insurance, risk, and market power in banking. American Economic Review, 80(5), 1183–1200. https://doi.org/10.2307/2006769
Kim, J. (2018). Bank Competition and Financial Stability: Liquidity Risk Perspective. Contemporary Economic Policy, 36(2), 337–362. https://doi.org/10.1111/coep.12243
Kouki, I., & Al-Nasser, A. (2017). The implication of banking competition: Evidence from African countries. Research in International Business and Finance, 39, 878–895. https://doi.org/10.1016/j.ribaf.2014.09.009
Liu, H., Molyneux, P., & Nguyen, L. H. (2012). Competition and risk in south east Asian commercial banking. Applied Economics, 44(28), 3627–3644. https://doi.org/10.1080/00036846.2011.579066
Mason, E. (1939). Price and production policies of large scale enterprises. American Economic Review, 39(1), 61–74. https://doi.org/10.2307/1806955
Mirzaei, A., Moore, T., & Liu, G. (2013). Does market structure matter on banks’ profitability and stability? Emerging vs. advanced economies. Journal of Banking & Finance, 37(8), 2920–2937. https://doi.org/10.1016/j.jbankfin.2013.04.031
Moudud-Ul-Huq, S. (2020). Does bank competition matter for performance and risk-taking? empirical evidence from BRICS countries. International Journal of Emerging Markets, 16(3), 409–447. https://doi.org/10.1108/IJOEM-03-2019-0197
Nguyen, T. L., Le, A. H., & Tran, D. M. (2018). Bank competition and financial stability: Empirical evidence in Vietnam. Studies in Computational Intelligence, 760(Mishkin 1999), 584–596. https://doi.org/10.1007/978-3-319-73150-6_46
Nicolás, J., & Toval, A. (2009). On the generation of requirements specifications from software engineering models: A systematic literature review. Information and Software Technology, 51(9), 1291–1307. https://doi.org/10.1016/j.infsof.2009.04.001
Nicolo, V. (2016). Competition And Stability in The Banking Sector: Theory And Empirical Evidence. Universita’ Degli Studi Di Padova.
Noman, A. H. M., Gee, C. S., & Isa, C. R. (2018). Does bank regulation matter on the relationship between competition and financial stability? Evidence from Southeast Asian countries. Pacific Basin Finance Journal, 48, 144–161. https://doi.org/10.1016/j.pacfin.2018.02.001
Noory, S. N., Shahimi, S., & Ismail, A. G. (2021). A Systemic Literature Review on the Effect of Risk Management Practices on the Performance of Islamic Banking Instutution. Asian Journal of Accounting and Governance, 16, 53–75. https://doi.org/10.17576/AJAG-2021-16-05
Ovi, N. Z., Perera, S., & Colombage, S. (2014). Market power, credit risk, revenue diversification and bank stability in selected ASEAN countries. South East Asia Research, 22(3), 399–416. https://doi.org/10.5367/sear.2014.0221
Pak, O., & Nurmakhanova, M. (2013). The Effect of Market Power on Bank Credit Risk-Taking and Bank Stability in Kazakhstan. Transition Studies Review, 20(3), 335–350. https://doi.org/10.1007/s11300-013-0297-z
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Published
2022-07-27
How to Cite
SAFITRI, Ni Wayan Noviana et al.
Perspective Contradiction Regarding Competition and Financial Stability in the Banking Sector: Review of Literature.
Jurnal Ilmiah Akuntansi dan Bisnis, [S.l.], v. 17, n. 2, p. 313-332, july 2022.
ISSN 2303-1018.
Available at: <https://ojs.unud.ac.id/index.php/jiab/article/view/86378>. Date accessed: 20 apr. 2024.
doi: https://doi.org/10.24843/JIAB.2022.v17.i02.p09.
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