CEU Electronic Theses and Dissertations, 2023
| Author | Mkrtchyan, Gohar |
|---|---|
| Title | What is the impact of bank competition on bank stability? An empirical study of the Armenian banking system from 2004 to 2021 |
| Summary | The relationship between bank competition and bank stability is a widely discussed topic in economic literature. This research aims to examine the impact of bank competition on bank stability in the Armenian financial market during the period from 2004 to 2021. I conduct fixed effects panel data analysis to investigate the relationship between bank concentration, measured by Herfindahl-Hirschman Index (HHI) for loan and deposit markets separately, and bank risk, measured by non-performing loan (NPL) ratio (proxy for credit risk) or Z-index (proxy for overall bank risk). I control for bank specific variables, including number of branches, bank size, asset composition, bank capital, return on assets, as well as the Central Bank refinancing rate. The regression analyses conducted for both loan and deposit markets provide contrasting results, supporting my initial hypothesis. More specifically, for the loan market, I find a positive and significant relationship between the bank concentration index and credit risk. Additionally, I find a negative and significant relationship between the bank concentration index and Z-index, which is also consistent with the “competi tion-stability& #x201d; view. On the other hand, in line with “competi tion-fragility& #x201d; view, in the deposit market, I find a negative and significant relationship between the concentration index and credit risk, as well as a positive and significant relationship between the concentration index and Z-index. My findings suggest that policymakers should adopt tailored approaches for loan and deposit markets because of the divergent impacts of competition on bank stability. |
| Supervisor | Schindele Ibolya |
| Department | Economics MA |
| Full text | https://www.etd.ceu.edu/2023/mkrtchyan_gohar.pdf |
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