Publication detail

Bank Competition and Financial Stability: Much Ado About Nothing?

Author(s): doc. PhDr. Tomáš Havránek Ph.D.,
Mgr. Diana Žigraiová ,
Type: IES Working Papers
Year: 2015
Number: 7
Published in: IES Working Papers 7/2015
Publishing place: Prague
Keywords: Bayesian model averaging, bank competition, financial stability, publication selection bias, meta-analysis
JEL codes: C83, C11, G21, L16
Suggested Citation: Zigraiova D., Havranek T. (2015). “ Bank Competition and Financial Stability: Much Ado About Nothing?” IES Working Paper 7/2015. IES FSV. Charles University.
Grants: GACR 15-02411S Development and Applications of Meta-Regression Methods in Economics
Abstract: The theoretical literature gives conflicting predictions on how bank competition should affect financial stability, and dozens of researchers have attempted to evaluate the relationship empirically. We collect 598 estimates of the competition-stability nexus reported in 31 studies and analyze the literature using meta-analysis methods. We control for 35 aspects of study design and employ Bayesian model averaging to tackle the resulting model uncertainty. Our findings suggest that the definition of financial stability and bank competition used by researchers influences their results in a systematic way. The choice of data, estimation methodology, and control variables also affects the reported coefficient. We find evidence for moderate publication bias. Taken together, the estimates reported in the literature suggest little interplay between competition and stability, even when corrected for publication bias and potential misspecifications.
Downloadable: wp7_2015_zigraiova_havranek




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