Working Paper: CEPR ID: DP16566
Authors: Zlem Dursunde Neef; Thomas Gehrig
Abstract: We document that within regional U.S. mortgage markets an increase in competition exerts differential effects on banks with large and small market shares. Large market share banks reduce capitalization and increase risk taking as a response to an increase in the intensity of competition, while small market share banks enhance capitalization and reduce risk taking. These results are tied to market shares and not driven by bank size or the level of concentration within local regional markets.
Keywords: Bank Capital; Credit Market Competition; Risk Taking; Fragility; Stability
JEL Codes: D22; G21; L13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| credit market competition (E44) | bank capitalization (G21) |
| credit market competition (E44) | risk-taking (D81) |
| credit market competition (E44) | bank capitalization (small banks) (G21) |
| credit market competition (E44) | risk density (small banks) (G21) |