Bank competition, fire-sales and financial stability
Chan, K. and Milne, A. 2014. Bank competition, fire-sales and financial stability. European Journal of Finance. 20 (10), pp. 874-891. https://doi.org/10.1080/1351847X.2013.836552
Chan, K. and Milne, A. 2014. Bank competition, fire-sales and financial stability. European Journal of Finance. 20 (10), pp. 874-891. https://doi.org/10.1080/1351847X.2013.836552
| Title | Bank competition, fire-sales and financial stability |
|---|---|
| Type | Journal article |
| Authors | Chan, K. and Milne, A. |
| Abstract | This paper applies a simple liquidity modelling framework and shows that forced asset sales (‘fire-sale’) provide an alternative theoretical support to the traditional view that bank competition can lead to financial instability. This arises from the fact that in a multi-bank economy, a bank can take advantage of other banks in fire-sale by choosing a riskier funding structure, and the incentive to do so increases as the number of banks in the economy increases. We also discuss the effectiveness of some possible policies to restrain the incentives for excessive risk-taking. |
| Journal | European Journal of Finance |
| Journal citation | 20 (10), pp. 874-891 |
| ISSN | 1351-847X |
| Year | 2014 |
| Publisher | Routledge |
| Digital Object Identifier (DOI) | https://doi.org/10.1080/1351847X.2013.836552 |
| Publication dates | |
| Published online | 12 Sep 2013 |
| Published in print | 2014 |