Competition Between Banks with Different Ownership Structure: Implications for Performance, Risk and Welfare

40 Pages Posted: 27 Jun 2012

See all articles by Mónica LopezPuertas-Lamy

Mónica LopezPuertas-Lamy

Charles III University of Madrid - Department of Business Administration

Oscar Gutierrez

Autonomous University of Barcelona - Faculty of Economics and Business Studies

Date Written: June 1, 2012

Abstract

This paper analyses the effects of competition between banks with different ownership structures on financial stability, social welfare, risk-taking incentives and performance. Specifically, we present a model of strategic competition in the retail banking sector where a profit-maximizing bank, i.e., commercial bank competes against a non-for-profit maximizing bank, i.e., stakeholder bank.

Our main conclusions are that the presence of stakeholder banks increases systemic financial stability, social welfare, and banking competition. We also show that stakeholder banks are less risk-inclined and obtain a higher market share than commercial banks; and that any bank is less stable and less profitable when competing against a stakeholder bank. Our predictions are validated by the empirical evidence. Thus, our model contributes to the current debate on the future of stakeholder banks suggesting that policy makers worried about systemic financial stability may favor a stakeholder approach in the banking system.

Keywords: Ownership Structure, Risk-Taking, Systemic Financial Stability, Competition

JEL Classification: G21, G32, G18, G38

Suggested Citation

LopezPuertas-Lamy, Mónica and Gutierrez, Oscar, Competition Between Banks with Different Ownership Structure: Implications for Performance, Risk and Welfare (June 1, 2012). Available at SSRN: https://ssrn.com/abstract=2094535 or http://dx.doi.org/10.2139/ssrn.2094535

Mónica LopezPuertas-Lamy (Contact Author)

Charles III University of Madrid - Department of Business Administration ( email )

Calle Madrid 126
Getafe, Madrid, Madrid 28903
Spain

Oscar Gutierrez

Autonomous University of Barcelona - Faculty of Economics and Business Studies ( email )

Campus Bellaterra
Barcelona, 08193
Spain

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
148
Abstract Views
806
Rank
356,750
PlumX Metrics