Bank market power after a banking crisis: Some international evidence

Abstract

This paper analyzes the influence of banking crises on bank market power across a sample of 64 countries and 66 episodes of banking crises during the 1989–2007 period. We provide evidence from country- and bank-level data supporting that, after a systemic banking crisis, there is an increased level of bank market power consistent with higher levels of bank market concentration. Moreover, the higher the severity of the banking crisis the higher the increase in bank market power. However, whereas institutional quality fosters the positive impact of banking crises on market power, stricter regulation on banking activities and on new entries into the bank market seems to reduce the effect of the crisis on market power.