Does banking system transparency stimulate bank competition? Cross-country evidence (Center for Institutional Studies Research Seminar)

Speaker: Irina Andrievskaya (PhD, Research fellow at the CInSt)

Speaker: Irina Andrievskaya (PhD, Research fellow at the CInSt)

November 28, Thursday, Maysnitskaya 24, building 3, room 424, 18.30. 

There seems to be a consensus among regulators and scholars that in order to improve the functioning of the banking system and to stimulate competition, it is necessary to raise the level of the information transparency and enhance bank disclosure. However, numerous empirical studies that examine the determinants of the competition in the financial sector, the effect of competition on the financial stability or the relationship between the transparency and the bank stability, leave aside the link between the transparency and the competition. The aim of this paper is to fill the gap in the literature with this respect. To test the hypothesis that greater bank disclosure is associated with lower bank market power and lower concentration in the banking system, we use the country-level data covering 213 countries all over the world. The period under consideration includes the years 2001, 2005 and 2010, which correspond to the years of the World Bank's Banking Regulation and Supervision Survey rounds. Our findings contradict the regulators’ predictions: higher transparency does not result into reduction of the market power, lowering, however, the concentration level.

Working paper: download