Template-type: ReDIF-Article 1.0
Author-Name: Adnan Kasman
Author-X-Name-First: Adnan
Author-X-Name-Last: Kasman
Author-Homepage: 
Author-Workplace-Name: Dokuz Eylul University
Author-Workplace-Homepage: 
Author-Name: Oscar Carvallo
Author-X-Name-First: Oscar
Author-X-Name-Last: Carvallo
Author-Workplace-Name: Central Bank of Venezuela
Author-Workplace-Homepage: 
Title: Financial stability, competition and efficiency in Latin American and Caribbean banking
Abstract: Using a sample of 272 commercial banks from fifteen Latin American countries for the
	period 2001-2008, we estimate cost and revenue efficiency scores, financial stability scores
	(Z-scores) and competition scores (Lerner indexes and Boone indicators) at the bank level.
	The Granger causality technique in dynamic panels is used to establish dynamic relationships
	among these variables. We find evidence that strongly supports the “quite life” hypothesis,
	while we also find partial support for causality running in the opposite direction. Moreover,
	the results suggest that more competition is conducive to greater financial stability (when
	the revenue efficiency score is used). Banks seem to achieve market power through better
	efficiency, leverage and earning ability. As size and complexity increase, however, agency
	problems and increasing risk-taking might start gaining momentum, generating inefficiency
	and fragility.
Classification-JEL: G21, D24, C23
Keywords: financial stability, competition, efficiency, Latin American banking
Journal: Journal of Applied Economics
Pages: 301-324
Number: 2
Volume: 17
Year: 2014
Month: November
File-URL: http://www.sciencedirect.com/science/journal/15140326/17/2
File-Format: application/pdf
File-Restriction: Online access is restricted to ScienceDirect
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Handle: RePEc:cem:jaecon:v:17:y:2014:n:2:p:301-324