Financial nexus: Efficiency and soundness in banking and capital markets |
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| Institution: | 1. West University, Faculty of Economics and Business Administration, 16 Pestalozzi Blvd., Timi?oara 300115, Romania;2. Transilvania University of Bra?ov, Faculty of Economic Sciences and Business Administration, 29 Eroilor Blvd., 500036 Bra?ov, Romania;3. Craiova University, Faculty of Economics and Business Administration, 13 A.I. Cuza Street, Craiova 200585, Romania;1. Department of Economics, Northwest Missouri State University, Maryville, MO 64468, USA;2. Department of Economics, Oklahoma State University, Stillwater, OK 74078, USA;1. School of Economics and Finance, Xi''an Jiaotong University, PR China;2. School of Accounting, Shanghai University of International Business and Economics, PR China;3. Xi''an Branch, The People''s Bank of China, PR China;1. Faculty of Business & Accountancy, University of Malaya, Malaysia;2. Department of Economics and Finance, Southern Illinois University Edwardsville, USA;3. Faculty of Management Sciences, Capital University of Science and Technology, Islamabad, Pakistan;4. Institute of Business Administration, University of Sindh, Jamshoro, Pakistan |
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| Abstract: | Based on a modified version of the model used in Corvoisier and Gropp (2002) and De Guevara et al. (2005), we argue that banks' soundness, the structural characteristics and efficiency of the banking sector along with the development of the capital markets constitute a financial nexus. For a data set of 63 developed and developing countries, we find evidences that efficiency significantly modulates the linkages between concentration and soundness. We also find that capital markets' development supports a stable evolution in banking sector. For the relationship between capital markets and soundness, our findings appear to be robust for various measures of the considered variables as well as for different estimation techniques. Regarding the impact of the concentration upon soundness, the results obtained display a certain sensitivity about the way concentration is measured. |
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| Keywords: | Bank concentration Efficiency and soundness Lerner index Arellano and Bover models Two-stages quantile regression models G21 G28 L11 |
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