Does concentration matter for bank stability - evidence from Albanian Banking System

Shijaku, Gerti (2016): Does concentration matter for bank stability - evidence from Albanian Banking System.

Abstract

Motivated by the debate on concentration-stability nexus, this paper studies the impact of bank concentration on the likelihood of a country suffering systemic bank fragility. For this reason, we followed a new approach using on-site bank balance sheet information to construct our proxy that represent each bank stability condition and use a variety of internal and external factors to estimate a balance panel dynamic two-step General Method of Moments (GMM) approach for the period 2008 – 2015. First, results provide supportive evidence consistent with the concentration-fragility view. Second, macroeconomic variables seem to have a significant effect on bank stability, which is not found for the sovereignty primary risk. By contrast, the bank-specific variables have also a significant effect on bank stability conditions. Finally, non-systemic banks are found to be more sensitive to macroeconomic condition and market concentration, while the better capitalised banks are less sensitive to fragility at the expense of lower operation efficiency.

• Item Type: MPRA Paper
• Language: English
• Keywords: Bank Fragility, Primary Sovereignty Risk, Panel Data, Dynamic GMM
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C26 - Instrumental Variables (IV) Estimation; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E43 - Interest Rates: Determination, Term Structure, and Effects; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages; H - Public Economics > H6 - National Budget, Deficit, and Debt > H63 - Debt ; Debt Management ; Sovereign Debt

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