Competition, Efficiency and Stability in Banking

The stability of the banking sector remains a cornerstone of economic prosperity, influencing everything from individual financial security to global economic trends. As such, understanding the dynamics that underpin banking stability is essential for policymakers, economists, and stakeholders. This research delves into the intricate interplay between competition, efficiency, and stability within the banking industry, particularly focusing on banks and financial institutions listed on the Tehran Stock Exchange. Despite extensive studies, the definitive impacts of competition on banking stability remain ambiguous and multifaceted, sparking a rich tapestry of academic inquiry and policy debate.This paper aims to bridge the gaps in existing literature by empirically exploring how competition influences banking stability, mediated through mechanisms of efficiency. Traditional economic theories posit that increased competition drives market players towards greater efficiency by redistributing resources from less to more efficient entities, thereby enhancing overall market stability. However, this perspective is not unchallenged. Theoretical and empirical contradictions persist, reflecting in diverse findings that suggest both positive and negative impacts of competition on banking stability. For instance, while some studies highlight competition's role in reducing banks' profit margins and potentially elevating risk through aggressive financial strategies, others argue that competition induces a healthier, more resilient banking environment.

کلیدواژه ها:

Competition ، Efficiency ، Stability in Banking