ECONOMIC SYSTEMS, vol.39, no.3, pp.502-517, 2015 (SSCI)
This paper analyzes the impact of competition and concentration on bank stability in the Turkish banking industry over the period 2002-2012. The Boone indicator and the efficiency-adjusted Lerner index are used as proxies for competition, while the non-performing loans (NPL) ratio and Z-scores are used as proxies for bank stability. The main results indicate that competition is negatively related to the NPL ratio but positively related to the Z-score. The results further indicate that greater concentration has a positive impact on the NPL and a negative impact on the Z-score. We also use a quadratic term of the competition measures to capture a possible non-linear relationship between competition and stability. The results show that the coefficient of the quadratic term is negative for the NPL model and positive for the Z-score model. Overall, our findings provide support for the competition-fragility view. (C) 2015 Elsevier B.V. All rights reserved.