Banking market structure and financial stability: Evidence from the Texas real estate crisis in the 1980s

• 成果类型: Article
• 署名作者: Gan, J
• 署名单位: Hong Kong University of Science & Technology
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2003.07.004
• 发表日期: 2004
• 页码: 567-601
• 关键词: Market structure; moral hazard; Bank risk; franchise value; Financial stability

摘要

This paper examines the relationship between banking market structure and financial stability. Using data on thrifts, a type of banking institution specializing in residential mortgage lending, I test two related hypotheses. First, competition reduces franchise value. Second, reduced franchise Value induces risk taking. Testing the second hypothesis exploits predictions that when hit by an exogenous shock, the slope of risk with respect to franchise value becomes more negative because thrifts adopt bang-bang strategies and choose minimal or maximal risk. Using the Texas real estate collapse in the 1980s as a natural experiment, I find evidence supporting both hypotheses. (C) 2004 Elsevier B.V. All rights reserved.