The Bank Capitalization and the Nonlinear Concentration-Stability Nexus in the Euro Area: The PSTR Approach
The Bank Capitalization and the Nonlinear Concentration-Stability Nexus in the Euro Area: The PSTR Approach
Author(s): Adriana Novotná, Ľubica Štiblárová, Kristína KočišováSubject(s): Supranational / Global Economy, Business Economy / Management, Micro-Economics, Financial Markets, Public Finances, Socio-Economic Research
Published by: SAV - Slovenská akadémia vied - Ekonomický ústav SAV a Prognostický ústav SAV
Keywords: bank capitalization; stability; concentration; panel smoothing transition regression model; Euro Area;
Summary/Abstract: This study investigates the nonlinear relationship between bank concentration (market share) and stability (Z-score) across various bank capitalization levels (capital adequacy ratio) in Euro Area countries (2009-2019). Using a panel smoothing transition regression model, the study finds that the concentration-stability relationship is statistically insignificant when bank capitalization is low. However, the concentration-stability paradigm is confirmed when capitalization surpasses minimum regulatory requirements. Strengthening bank capitalization is crucial for enhancing stability, as higher capitalization allows banks to withstand economic shocks better.
Journal: Ekonomický časopis
- Issue Year: 72/2024
- Issue No: 05-06
- Page Range: 235-260
- Page Count: 26
- Language: English
