The mediating role of competition on deposit insurance and the risk-taking of banks in ASEAN countries
Document Type
Article
Publication Date
1-1-2022
Abstract
We investigate the mediating function of competition on the association between deposit insurance and the risk-taking of banks during an economic meltdown. In our analysis, we address issues of deposit insurance, competition, bank risk-taking, and bank crisis with explicit deposit insurance and full coverage dummies. Deposit insurance reduces bank risk in the absence of competition by reducing both credit and insolvency risk; however, it exacerbates bank risk and weakens banking stability in a highly competitive market. It also shows that the banking instability in a competitive market is attenuated by deposit insurance during financial crisis. This study offers policy implications.
Keywords
Bank risk-taking, Competition, Crisis, Deposit insurance, Regulation
Divisions
arts,advanced,Faculty_of_Business_and_Accountancy
Funders
Fundamental Research Grant Scheme (FRGS) [Grant No: FP076-2019A]
Publication Title
Research in International Business and Finance
Volume
59
Publisher
Elsevier
Publisher Location
RADARWEG 29, 1043 NX AMSTERDAM, NETHERLANDS