Creditor rights and the market power-stability relationship in banking

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Abstract

I use the staggered passage of creditor rights reforms in 13 countries to examine how changes in creditor rights affect (a) bank stability and (b) the bank market power-stability relationship. (a) There is statistically weak evidence that stronger creditor rights enhance bank stability; the result is not robust across specifications. (b) Market power positively affects stability. However, there is asymmetry in the effect of market power on stability, depending on whether there is an increase or a decrease in creditor rights. The market power-stability relationship is stronger when a country weakens its creditor rights vis-á-vis when it strengthens its creditor rights.
Original languageEnglish
Pages (from-to)53-63
Number of pages11
JournalJournal of Financial Stability
Volume40
Early online date16 Oct 2017
DOIs
Publication statusPublished - 1 Feb 2019

Structured keywords

  • AF Banking

Keywords

  • Bank risk-taking
  • Lerner index
  • Bank competition
  • Law and Finance

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