Bank competition, financial stability and welfare
This paper investigates the implications for financial stability, social welfare, risk-taking incentives and expected profits of competition between banks that differ in their respective objective function. We differentiate between commercial banks (i.e., shareholders' profit-maximizing banks)...
| Autores: | , |
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| Tipo de recurso: | artículo |
| Fecha de publicación: | 2025 |
| País: | España |
| Institución: | Universitat Autònoma de Barcelona |
| Repositorio: | Dipòsit Digital de Documents de la UAB |
| Idioma: | inglés |
| OAI Identifier: | oai:ddd.uab.cat:320749 |
| Acceso en línea: | https://ddd.uab.cat/record/320749 https://dx.doi.org/urn:doi:10.1007/s10436-025-00465-w |
| Access Level: | acceso abierto |
| Palabra clave: | Commercial bank Stakeholder bank Competition Risk-taking Systemic financial stabilit |
| Sumario: | This paper investigates the implications for financial stability, social welfare, risk-taking incentives and expected profits of competition between banks that differ in their respective objective function. We differentiate between commercial banks (i.e., shareholders' profit-maximizing banks) and stakeholder banks (i.e., stakeholders' welfare-maximizing banks), showing that: (1) The presence of stakeholder banks increases systemic financial stability and social welfare. (2) Stakeholder banks are less risk-inclined and obtain a higher market share than commercial banks. (3) Any bank chooses a riskier portfolio and is less profitable when competing against a stakeholder bank compared to competing against a commercial bank. Our theoretical findings are consistent with the existing empirical evidence and yield important policy implications and new empirically testable predictions. |
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