Bank competition and banking system stability: Evidence from Turkey

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Tezin Türü: Yüksek Lisans

Tezin Yürütüldüğü Kurum: Orta Doğu Teknik Üniversitesi, İktisadi ve İdari Bilimler Fakültesi, İktisat Bölümü, Türkiye

Tezin Onay Tarihi: 2009

Öğrenci: SELVİ AK KOCABAY

Danışman: ERDAL ÖZMEN

Özet:

This study empirically investigates the validity of the competition and stability trade-off hypothesis for the Turkish banking system. To this end, we consider annual bank level accounting data for the 1990-2008 period and compute the most commonly used measures of banking stability and competition. The effects of macroeconomic factors and bank specific indicators including the ownership structure are also taken into account. The fixed effects panel estimation results suggest that the relation between competition and stability is not invariant to the use of alternative indicators. The results based on the Z-Index as a measure of bank stability support the competition-stability and competition-fragility views when concentration ratios and the H-Statistics are used as the alternative competition indicators, respectively. However, when nonperforming loan ratio, a proxy for loan portfolio risk, is used as a stability measure, exactly the opposite outcome is obtained. The results also change when the ownership structure of banks is considered. Consequently, in line with the literature stating that there is no clear-cut relation between competition and stability, the direction of this relation for the Turkish banking system changes with different model specifications.