European Journal of Business and Management
Banking Concentration and Financial Stability: New Evidence from a Developing Country
Abstract
The policy debate on the trade-off and synergies between bank concentration and financial stability remains unresolved. Previous studies suggest two hypotheses; ‘concentration-stability’ and ‘concentration-fragility’. This paper investigated the effect of bank concentration on financial stability in Kenya using Structural Equation Modelling (SEM) for the period 1990-2017. Estimation results reveal that high concentration leads to instability of the financial system. Further, increased competition improves stability of the financial system while regulation positively affects financial stability and bank concentration. Therefore, policies that ensures less bank concentration and enhance bank competition may significantly improve financial stability.
Keywords: Financial stability, Banking Fragility, Structural Equation Model
JEL classification: G21, G28.
DOI: 10.7176/EJBM/11-25-08
Publication date:September 30th 2019
To list your conference here. Please contact the administrator of this platform.
Paper submission email: EJBM@iiste.org
ISSN (Paper)2222-1905 ISSN (Online)2222-2839
Please add our address "contact@iiste.org" into your email contact list.
This journal follows ISO 9001 management standard and licensed under a Creative Commons Attribution 3.0 License.
Copyright © www.iiste.org