Ephraim Clark, The Business School, Middlesex University, The Burroughs, London
Davide Salvatore Mare, Business School, Credit Research Centre, The University of Edinburgh
Nemanja Radić, The Business School, Middlesex University, The Burroughs, London
Published in Journal of International Financial Markets, Institutions and Money, Volume 52, January 2018, Pages 90-101.
In the wake of the Global Financial Crisis the discussion on preventive regulatory policies has generally overlooked the role of different business models and goals. Credit institutions with mutual objectives are a case in point that is the object of this study, which focuses on the relationship between competition and financial stability in European cooperative banking between 2006 and 2014. Our results show that there exists a hump-shaped relationship between market power and stability, particularly in the loan market. Interestingly, we also find that, diversification in assets and liabilities significantly increases cooperative banks’ solvency.