Market concentration, risk-taking, and bank performance: Evidence from emerging economies

Jianhua Zhang, Chunxia Jiang (Corresponding Author), Baozhi Qu, Peng Wang

Research output: Contribution to journalArticle

Abstract

This paper investigates the relationship between market concentration, risk-taking, and bank performance using a unique dataset of the BRIC banks over the period 2003-2010. We find a negative association between market concentration and performance, in support of the "quiet life" hypothesis. We also find that banks taking a lower level of risks perform better, in favor of prudential practice. Moreover, the BRICs' banking sectors were all negatively affected by the 2007-2008 global financial crisis with China and Russia being the least and most affected, respectively. On average Chinese and Brazilian banks outperform Indian and Russian ones, indicating that China and Brazil have more favorable institutional infrastructure. These results are robust to alternative model specifications and estimation techniques. Our analysis may have important policy implications for bankers and regulators in the BRICs and other developing and transition countries. © 2013 Elsevier Inc.
Original languageEnglish
Pages (from-to)149-157
Number of pages9
JournalInternational Review of Financial Analysis
Volume30
Early online date23 Aug 2013
DOIs
Publication statusPublished - Dec 2013

Fingerprint

BRIC countries
Market concentration
Bank performance
Risk taking
Emerging economies
China
Model specification
Banking sector
Transition countries
Institutional infrastructure
Market performance
Developing countries
Russia
Global financial crisis
Bankers
Alternative models
Policy implications
Brazil

Keywords

  • Bank performance
  • Brazil
  • China
  • India
  • Market concentration
  • Risk-taking
  • Russia
  • Stochastic frontier analysis

Cite this

Market concentration, risk-taking, and bank performance : Evidence from emerging economies. / Zhang, Jianhua; Jiang, Chunxia (Corresponding Author); Qu, Baozhi; Wang, Peng.

In: International Review of Financial Analysis, Vol. 30, 12.2013, p. 149-157.

Research output: Contribution to journalArticle

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