Based on the nonlinear pattern of competition the regulators should adopt different policies for short and long run. Hence those banks should be cautious to minimize non-performing loans and maximize stability regarding financial and efficiency. More intently policymakers should nurture both cost and revenue efficiency for large banks as these are less efficient than small banks in concentrated markets though these banks produce risk. Practical implications - This study promotes higher market power for the bank's profitability and financial stability. However, the key robust results are as follows: (1) in competitive markets large banks are more efficient than small banks (2) there is a nonlinear relationship between competition performance and risk (3) across bank size competition heterogeneously affects profitability efficiency risk and stability (4) notably small banks are as efficient as large banks during crisis but shared with risk and (5) small banks also stable during crisis in highly concentrated markets but less stable in competitive environments. Findings - This study confirms the significant impact of competition that complies with the structure-conduct-performance hypothesis quiet life hypothesis and “competition fragility” view.

Later the paper validates the core results by using three-stage least squares (3SLS) and incorporating alternative measure of competition in baseline equations. Design/methodology/approach - Dynamic panel generalized method of moments (GMM) has been used primarily to examine the effect of bank competition on performance and risk-taking. Brazil Russia India China and South Africa) for the period 2000–2015.

The analysis empirically uses dynamic panel data from 1137 banks of the BRICS countries (i.e. Purpose - This study examines the relationship between banks' competition performance and risk-taking behavior concerning the impacts of bank size and the recent global financial crisis.

Publisher 2019 download