Publication
Competition and the risk of bank failure: breaking with the representative borrower assumption
| dc.contributor.author | Ferreira, Rodolphe dos Santos | |
| dc.contributor.author | Modesto, Leonor | |
| dc.date.accessioned | 2021-07-19T11:22:50Z | |
| dc.date.available | 2021-07-19T11:22:50Z | |
| dc.date.issued | 2021-08 | |
| dc.description.abstract | We examine the relation between intensity of competition in the loan market and risk of bank failure, in a model with adverse selection. As well established, the presence of the two opposite margin and risk-shifting effects creates conditions for nonmonotonicity: the conventional competition-fragility view may be challenged at high interest rates. These rates may however be too high to be compatible with oligopolistic equilibrium conditions. The challenging competition-stability view has been argued in terms of a representative borrower managing the profitability-safeness trade-off under moral hazard. However, the representative borrower assumption is not innocuous, playing down by construction the margin effect. The paper considers the adverse selection situation where that trade-off is managed by banks facing heterogeneous borrowers, and shows analytically, in the case of a trapezoidal distribution of idiosyncratic and systemic risk factors, that the conventional view is always valid. | pt_PT |
| dc.description.version | info:eu-repo/semantics/publishedVersion | pt_PT |
| dc.identifier.doi | 10.1111/jpet.12509 | pt_PT |
| dc.identifier.eid | 85104085889 | |
| dc.identifier.issn | 1467-9779 | |
| dc.identifier.uri | http://hdl.handle.net/10400.14/34176 | |
| dc.identifier.wos | 000638213900001 | |
| dc.language.iso | eng | pt_PT |
| dc.peerreviewed | yes | pt_PT |
| dc.rights.uri | http://creativecommons.org/licenses/by-nc-nd/4.0/ | pt_PT |
| dc.title | Competition and the risk of bank failure: breaking with the representative borrower assumption | pt_PT |
| dc.type | journal article | |
| dspace.entity.type | Publication | |
| oaire.citation.endPage | 638 | pt_PT |
| oaire.citation.issue | 4 | pt_PT |
| oaire.citation.startPage | 622 | pt_PT |
| oaire.citation.title | Journal of Public Economic Theory | pt_PT |
| oaire.citation.volume | 23 | pt_PT |
| person.familyName | Dos Santos Ferreira | |
| person.familyName | Modesto | |
| person.givenName | Rodolphe | |
| person.givenName | Leonor | |
| person.identifier.ciencia-id | A012-4EF9-7FAC | |
| person.identifier.ciencia-id | B715-B2B5-2273 | |
| person.identifier.orcid | 0000-0001-6966-281X | |
| person.identifier.orcid | 0000-0002-8302-2613 | |
| person.identifier.scopus-author-id | 8336417500 | |
| person.identifier.scopus-author-id | 6603256456 | |
| rcaap.rights | openAccess | pt_PT |
| rcaap.type | article | pt_PT |
| relation.isAuthorOfPublication | f8e27c48-e08a-499d-8956-99b6ec11556f | |
| relation.isAuthorOfPublication | 02620f90-9701-4b0c-b97a-3c6f954f9499 | |
| relation.isAuthorOfPublication.latestForDiscovery | 02620f90-9701-4b0c-b97a-3c6f954f9499 |
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