Intricacies of competition,stability, and diversification: Evidence from dual banking economies |
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| Institution: | 1. INCEIF, Kuala Lumpur, Malaysia;2. Taylor''s Business School, Taylor''s University, Malaysia;3. Nottingham University Business School, University of Nottingham Malaysia Campus, Semenyih, Malaysia;4. Suleman Dawood School of Business, Lahore University of Management Sciences (LUMS), Lahore, Pakistan;1. Faculty of Economics, Chulalongkorn University, Bangkok, Thailand;2. Department of Econometrics and Business Statistics, Monash University, Victoria, Australia;1. School of Graduate Studies, International Centre for Education in Islamic Finance (INCEIF), Lorong Universiti A, 59100 Kuala Lumpur, Malaysia;2. Suleman Dawood School of Business, Lahore University of Management Sciences (LUMS), Opp Sector U, DHA IV, Lahore, Pakistan;1. LEMNA, University of Nantes, IEMN–IAE, Chemin de la Censive du Tertre, BP 52231, 44322 Nantes, France;2. PSB Paris School of Business, Department of Economics, 59 rue Nationale, 75013 Paris, France |
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| Abstract: | This paper investigates the nexus of competition and stability by introducing the interaction of diversification and competition. We use a sample of both conventional and Islamic banks from 14 dual banking economies over 2005–2016. The core finding illustrates that competition does not impact bank stability and that diversification is insignificant in the competition-stability nexus. Further, we find that concentration is beneficial for the banking stability of both types of banks. In most of our results, we found no difference in the impact of competition and diversification on the stability of conventional and Islamic banks. To put our findings in a broader context, we argue that no difference between the business models can be considered an early signal of possible convergence between the two systems. |
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| Keywords: | Bank competition Diversification Stability Dual banking economies G21 G33 G38 |
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