ERF 27th Annual Conference
Oil, Monarchies, and Bank Concentration: Evidence from the 2008 Global Financial Crisis
No.
ERF27_93
Publisher
ERF
Date
May, 2021
Topic
G. Financial Economics
Banking concentration, defined as the proportion of total assets owned by either the three or five largest banks in an economy, varies widely across countries. At the high end of the spectrum, we see values above 90% for countries such as Sweden or Myanmar, with values as small as 30% in the United States or India at the lower end. While prior literature has focused on the impact of banking concentration on financial stability or economic growth, we lack a systematic understanding of the determinants of banking concentration across countries. This paper seeks to fill this gap by studying the role of two dimensions, namely political institutions and terms of trade volatility induced by natural resource abundance. Using difference-in-differences analysis and the 2008 Global Financial Crisis as a universal shock, we show growing divergence in bank concentration between the Middle Eastern monarchies and other regime types since 2008. This divergence is more pronounced when we restrict our analysis to an autocracy-only sample. We conclude the paper by offering a political economy explanation for the relatively higher levels of bank concentration in Middle Eastern monarchies.
Authors
Sam Houdi
Civil Servant for the UK government
Authors
Adeel Malik
Globe Fellow in the Economies of Muslim...