Does banking competition affect financial stability in the Philippines?
| dc.contributor.advisor | Daway-Ducanes, Sarah Lynne S. | |
| dc.contributor.author | Lagac, Joyce Marie P. | |
| dc.date.accessioned | 2024-11-14T07:47:04Z | |
| dc.date.available | 2024-11-14T07:47:04Z | |
| dc.date.issued | 2021-07 | |
| dc.description.abstract | The theoretical and empirical literature on the relationship between competition-financial stability remain inconclusive. The competition-fragility hypothesis argues that greater competition reduces bank profit margins that encourages excessive risk-taking among banks, endangering financial stability (margin effect). Taking a diametrically opposite view, the competition-stability hypothesis asserts that more competition drives down interest rates charged by banks on “safer” loans, reducing the probability of default and thereby promoting financial stability (risk-shifting effect). A third hypothesis forwards for an inverse U-shaped relationship between competition and financial stability: past a critical level of competition, the margin effect starts dominating the risk-shifting. This study investigates the impact of banking competition on the financial stability of banks in the Philippines from 2006-2015. Using two-step system Generalized Method of Moments, the empirical results verify an inverse U-shaped relationship between competition and financial stability, using the Boone indicator for loans as a measure of market competition. Moreover, for at least half of the banks in the sample, less competition results in greater financial stability, providing support to the competition-fragility hypothesis. The study also finds evidence that the Basel III policy has improved the relationship between banking competition and financial stability in the deposit market. | |
| dc.identifier.uri | https://selib.upd.edu.ph/etdir/handle/123456789/1352 | |
| dc.language.iso | en | |
| dc.subject | Banking Competition | |
| dc.subject | Financial Stability | |
| dc.subject | Bank Regulation | |
| dc.title | Does banking competition affect financial stability in the Philippines? | |
| dc.type | Thesis |