Banking Market Structure, Liquidity Needs, and Industrial Volatility

35 Pages Posted: 26 Feb 2009 Last revised: 30 Jan 2013

See all articles by Jiaren Pang

Jiaren Pang

Tsinghua University - School of Economics & Management

Yanping Shi

University of International Business and Economics (UIBE) - School of International Trade and Economics

Haibin Wu

City University of Hong Kong (CityUHK)

Date Written: November 1, 2011

Abstract

This paper examines the relationship between banking market structure and industrial growth volatility. We find that regulatory restrictions on entry and competition in the banking sector increase growth volatility of the real sector, and the effect is more pronounced for industries with higher liquidity needs. On the other hand, bank concentration seems to reduce volatility, especially for industries with higher liquidity needs. Our findings are not inconsistent with each other as bank concentration may not be a good measure for competition and they may actually measure different aspects of the banking market structure.

Keywords: Market Structure, Competition, Concentration, Volatility

JEL Classification: G21, G28, E32

Suggested Citation

Pang, Jiaren and Shi, Yanping and Wu, Haibin, Banking Market Structure, Liquidity Needs, and Industrial Volatility (November 1, 2011). 24th Australasian Finance and Banking Conference 2011 Paper, Available at SSRN: https://ssrn.com/abstract=1350142 or http://dx.doi.org/10.2139/ssrn.1350142

Jiaren Pang (Contact Author)

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
China

Yanping Shi

University of International Business and Economics (UIBE) - School of International Trade and Economics ( email )

10 East Huixin Street
Chaouang District
Beijing, 100029
China

Haibin Wu

City University of Hong Kong (CityUHK) ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

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