2018, Volume 71 - Issue 2
RSS feed citation: At RePEc
Publication date: 02 May 2018
SOME INTERNATIONAL FINANCIAL CONTRIBUTIONS: EMPIRICAL RESULTS AND POLICY IMPLICATIONSRead the article
ASSESSING PORTFOLIO MARKET RISK IN THE BRICS ECONOMIES: USE OF MULTIVARIATE GARCH MODELSRead the article
BANK COMPETITION, CONCENTRATION AND RISK-TAKING IN THE UAE BANKING INDUSTRYRead the article
Aktham MAGHYEREH, University of Johannesburg, Johannesburg,South Africa
This paper investigates the impact of competition and concentration on bank stability or risk-taking behavior in the UAE banking industry over the period 2006 to 2015. The Herfindahl–Hirschmann (HHI) index is used as an inverse measure of competition, while the nonperforming loans (NPL) ratio and Z-scores are used as proxies for bank risk-taking. The impact of competition is derived from a dynamic panel specification that accounts for bank-level factors (size, efficiency, liquidity, and capitalization). Using the two-step system Generalized Method of Moments (GMM) estimates, our empirical results suggest that the increase in competition erodes banks’ charter value and increases their tendency to assume additional risks with associated negative repercussions on financial stability. These results strongly support the competition-fragility hypothesis for UAE banks.
G18, G21, G32, G38
Bank Competition, Bank Stability, Herfindahl–Hirschmann Index, UAE Banks
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