Purpose

Amidst the backdrop of a wide array of structural developments that have revolutionized the competitive landscape of Indian commercial banking, this paper aims to empirically examine the role of two external monitoring mechanisms – competition and concentration on financial stability and further highlights the significance of bank-level heterogeneity in the nexus.

Design/methodology/approach

The study uses the Lerner index, defined through a translog specification, as a measure of market power. A system generalized method of moments technique accounts for the dynamic associations among the competition-concentration-stability nexus. The study further examines the moderating effect of ownership, size and capitalization on the nexus. The study also uses the Boone indicator and comments on the competition-bank stability relationship after controlling for bank governance.

Findings

The findings indicate that banks are less stable in a more competitive and higher concentrated environment. Exploring bank-level heterogeneity, first, the authors report that as competition increases, state-owned banks have greater incentives to undertake risky activities than private and foreign banks, which point to implicit sovereign guarantees that characterize the former. Second, the authors document an adverse influence of competition on the soundness of larger banks consistent with the “too-big-to-fail” assertion. Third, results corroborate the disciplinary role of regulatory capital and lend support to stricter capital norms under Basel III in a more competitive environment.

Originality/value

This paper is perhaps the first to capture competition and concentration in a single model; to reconcile conflicting evidence on competition-risk nexus; to shed light on the joint effect of competition and Basel accords for Indian banks.

中文翻译：

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银行竞争、风险承担和金融稳定：来自新兴经济体的见解

目的

在一系列结构性发展彻底改变了印度商业银行竞争格局的背景下，本文旨在实证检验两种外部监测机制——竞争和金融稳定集中度的作用，并进一步强调银行层面的重要性。关系中的异质性。

设计/方法/方法

该研究使用通过 translog 规范定义的 Lerner 指数作为衡量市场力量的指标。矩量技术的系统广义方法解释了竞争-集中-稳定性关系之间的动态关联。该研究进一步检验了所有权、规模和资本化对关系的调节作用。该研究还使用了 Boone 指标，并在控制银行治理后对竞争-银行稳定性关系进行了评论。

发现

研究结果表明，在竞争更加激烈和高度集中的环境中，银行的稳定性较差。探索银行层面的异质性，首先，作者报告说，随着竞争的加剧，国有银行比私人银行和外国银行更有动力从事风险活动，这表明隐含的主权担保是前者的特征。其次，作者记录了竞争对大型银行稳健性的不利影响，这与“太大而不能倒”的说法一致。第三，结果证实了监管资本的纪律作用，并在更具竞争性的环境中支持巴塞尔协议 III 下更严格的资本规范。

原创性/价值

这篇论文也许是第一个在单一模型中捕捉竞争和集中度的论文。协调关于竞争风险关系的相互矛盾的证据；阐明竞争和巴塞尔协议对印度银行的共同影响。