Part of the Credit Research Centre Seminar Series.

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Friday 23 November 2018
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14:15–16:15
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Lecture Theatre 3 (lower ground floor)
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Dr Davide S. Mare; Research Economist; The World Bank

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This is a free event. Refreshments available from 14:00.

Paper authored by: Davide Mare (The World Bank), Franco Fiordelisi (University of Rome lll) and Philip Molyneux (University of Sharjah).

Were government intervention and market power significantly related to individual bank stability during the global financial crisis? Do market power and government intervention have a significant joint effect on individual bank stability? We address these questions in Eurozone banking between 2005 and 2012. We show that government intervention was ineffective in restoring individual bank stability whereas market power enhanced bank health. When we differentiate by type of government intervention, we find that both capital injections and guarantees are negatively related to bank health but this negative effect is magnified by bank market power in the case of guarantees.

Our results suggest a nuanced approach for Government intervention where the heterogeneity in the form of public support should be accounted for along with the joint effect with bank market power.

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