Market Concentration and Stability in European Banking
Market Concentration and Stability in European Banking

Author(s): Kristína Kočišová
Subject(s): Business Economy / Management, Economic history, Transformation Period (1990 - 2010), Present Times (2010 - today), EU-Accession / EU-DEvelopment, Financial Markets
Published by: Masarykova univerzita nakladatelství
Keywords: Market concentration; Banking stability; Granger causality test for panel data; European Union countries;
Summary/Abstract: Using aggregate balance sheet data from banking sectors across the European Union (EU) countries over the period from 2004 to 2014 this paper provides empirical evidence on the testing the links between the concentration and stability. The paper contains a theoretical definition of approaches used to test the relation between these two characteristics of the banking sector. We used selected methods to estimate the concentration and stability and to test the presence of concentration-stability or concentration-fragility paradigm in conditions of EU. The stability was estimated with Banking Stability Index (BSI) and Z-score and the market concentration was evaluated with Herfindahl-Hirschman Index (HHI) and Concentration Ratio (CR5). The presence of the paradigm was verified with the test of the Granger causality for panel data. As the result of our analysis, we can say, that in our study the only one-way relationship running from stability to market concentration was estimated.

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