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    Does alternative finance moderate bank fragility? Evidence from the euro area

    Mamatzakis, Emmanuel and Ongena, S. and Tsionas, M.G. (2021) Does alternative finance moderate bank fragility? Evidence from the euro area. Journal of International Financial Markets, Institutions and Money 72 , p. 101340. ISSN 1042-4431.

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    Abstract

    Over recent years stricter EU capital requirements have resulted in constraining bank lending to SMEs. Alternative finance is expected to ease such constraints, but what would it be its impact on bank fragility? This paper examines whether alternative finance for Small and Medium Enterprises (SMEs) in the euro area would moderate bank fragility. We employ a bank profit model from which we derive a novel measure of bank fragility that is based on micro-foundations and is estimated in a single stage with Bayesian techniques. Controlling for many bank and firm specific variables, including bank capital adequacy ratios and volatility, we find that alternative finance overall strengthens bank stability, but that there is some variability in this impact over time and across countries. Interestingly, while higher bank capital adequacy ratios at times may even increase fragility, their interactions with alternative finance could help reduce it.

    Metadata

    Item Type: Article
    Keyword(s) / Subject(s): Alternative finance, bank fragility, euro-area, Bayesian econometrics.
    School: School of Business, Economics & Informatics > Management
    Research Centres and Institutes: Accounting and Finance Research Centre
    Depositing User: Emmanuel Mamatzakis
    Date Deposited: 25 May 2021 11:56
    Last Modified: 15 Jun 2021 18:56
    URI: https://eprints.bbk.ac.uk/id/eprint/44357

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