# The Nexus of Competition, Loan Quality, and Ownership Structure for Risk-Taking Behaviour

^{1}

^{2}

^{3}

^{4}

^{5}

^{*}

## Abstract

**:**

## 1. Introduction

## 2. Literature Review

#### 2.1. Theoretical Literature Review

#### 2.1.1. Competition Fragility View

#### 2.1.2. Competition Stability View

#### 2.2. Empirical Literature

#### 2.2.1. Competition, Risk and Financial Stability (FS)

**Hypothesis 1 (H**

_{1}):**Hypothesis 2 (H**

_{2}):#### 2.2.2. Competition and Ownership Structure

**Hypothesis 3 (H**

_{3}):#### 2.2.3. Risk and Ownership Structure

**Hypothesis 4 (H**

_{4}):#### 2.2.4. Risk (Financial Stability) and Loan Quality

**σ**ROA) [

**σ**ROA determined by the standard deviation of total assets] and loan quality. Despite this, the relationship was not statistically significant because they used overall risk (

**σ**ROA) as a dependent variable in their analysis (Moudud-Ul-Huq et al. 2021).

**Hypothesis 5 (H**

_{5}):**Hypothesis 6 (H**

_{6}):#### 2.2.5. Risk, Financial Stability and Loan Composition

**σ**ROA) and loan composition. (Moudud-Ul-Huq et al. 2021).

**Hypothesis 7 (H**

_{7}):**Hypothesis 8 (H**

_{8}):## 3. Methodology

_{k}and W

_{j}denote the three input prices, W

_{1}, W

_{2}and W

_{3}(Berger et al. 2017). W

_{1}, W

_{2}and W

_{3}are the input prices used in the production process. W

_{1}defines the price of labor (i.e., personal expenses to total assets); W

_{2}defines the input price of the fund (i.e., interest expenses over total deposits); and W

_{3}defines the price of fixed capital (i.e., other operating and administrative expenses over total assets). Finally, the marginal cost is determined as follows: (Equation (3)):

_{i, t}is the share of a bank’s assets in each market, and Market assets

_{i,t}is the sum of all the shares of all bank assets.

#### 3.1. Econometric Model

_{i,t}specifies three bank competition indicators: (i) the Lerner index, (ii) HHIA and (iii) HHIL. OWS

_{i,t}represents the ownership structure of (I) Islamic banks, (II) commercial banks and (III) specialized government institutions. BCV

_{i,j,t}indicates the following control variables: (a) loan composition, (b) loan quality, (c) size and (d) customers. M

_{i,m,t}indicates the following macroeconomic variables: (i) gross domestic product growth (GGDP) and (ii) inflation rate. α and β are the estimated parameters in Equations (10) and (11), respectively, and $\mathsf{\epsilon}$ signifies the error.

#### 3.2. Unit Root Fisher Augmented Dickey–Fuller (ADF) Test

#### 3.3. Descriptive Statistics

#### 3.4. Correlation Analysis

#### 3.5. Variance Inflation Factor (VIF) Test

## 4. Regression Analysis and Discussion

#### The Bidirectional Causality of Competition and Risk Concerning the Impact of Ownership Structure

## 5. Conclusions, Policy Implications and Future Directions

## Author Contributions

## Funding

## Institutional Review Board Statement

## Informed Consent Statement

## Data Availability Statement

## Acknowledgments

## Conflicts of Interest

## Note

1 | https://www.worldbank, accessed on 15 May 2022. |

## References

- Agoraki, Maria-Eleni K., Manthos D. Delis, and Fotios Pasiouras. 2011. Regulations, competition and bank risk-taking in transition countries. Journal of Financial Stability 7: 38–48. [Google Scholar] [CrossRef][Green Version]
- Ali, Shoaib, Imran Yousaf, Sumayya Chughtai, and Syed Zulfiqar Ali Shah. 2022. Role of bank competition in determining liquidity creation: Evidence from GCC countries. Journal of Applied Economics 25: 242–59. [Google Scholar] [CrossRef]
- Al-Khouri, Ritab. 2012. Government ownership, competition, and the risk-taking Attitude of the GCC banking system. In Advances in Financial Economics. Bentley: Emerald Group Publishing Limited. [Google Scholar]
- Altunbas, Yener, Lynne Evans, and Philip Molyneux. 2001. Bank Ownership and Efficiency. Journal of Money, Credit and Banking 33: 926. [Google Scholar] [CrossRef]
- Anginer, Deniz, Asli Demirguc-Kunt, and Min Zhu. 2014. How does competition affect bank systemic risk? Journal of Financial Intermediation 23: 1–26. [Google Scholar] [CrossRef]
- Arellano, Manuel. 2002. Sargan’s Intrumental Variables Estimation and the Generalized Method of Moments. Journal of Business & Economic Statistics 20: 450–59. [Google Scholar]
- Azar, José, Sahil Raina, and Martin Schmalz. 2021. Ultimate ownership and bank competition. Financial Management 51: 227–26. [Google Scholar] [CrossRef]
- Barry, Thierno Amadou, Laetitia Lepetit, and Amine Tarazi. 2011. Ownership structure and risk in publicly held and privately owned banks. Journal of Banking & Finance 35: 1327–40. [Google Scholar]
- Beck, Thorsten, Asli Demirgüç-Kunt, and Ross Levine. 2006. Bank concentration, competition, and crises: First results. Journal of Banking & Finance 30: 1581–603. [Google Scholar]
- Berger, Allen N., Leora F. Klapper, and Rima Turk-Ariss. 2017. Bank competition and financial stability. In Handbook of competition in Banking and Finance. Cheltenham: Edward Elgar Publishing. [Google Scholar]
- Bond, Stephen R. 2002. Dynamic panel data models: A guide to micro data methods and practice. Portuguese Economic Journal 1: 141–62. [Google Scholar] [CrossRef][Green Version]
- Boone, Jan. 2008. A New Way to Measure Competition. The Economic Journal 118: 1245–61. [Google Scholar] [CrossRef][Green Version]
- Boyd, John H., and Gianni De Nicolo. 2005. The Theory of Bank Risk Taking and Competition Revisited. The Journal of Finance 60: 1329–43. [Google Scholar] [CrossRef]
- Carlson, Mark, Sergio Correia, and Stephan Luck. 2022. The Effects of Banking Competition on Growth and Financial Stability: Evidence from the National Banking Era. Journal of Political Economy 130: 462–520. [Google Scholar] [CrossRef]
- Cheng, Lingsha, and Yongmin Zhang. 2022. Do able managers take more risks? Journal of Innovation & Knowledge 7: 100182. [Google Scholar]
- Claessens, Stijn. 2009. Competition in the Financial Sector: Overview of Competition Policies. The World Bank Research Observer 24: 83–118. [Google Scholar] [CrossRef][Green Version]
- Davis, E. Philip, and Dilruba Karim. 2019. Exploring short- and long-run links from bank competition to risk. European Financial Management 25: 462–88. [Google Scholar] [CrossRef][Green Version]
- De Nicolò, Gianni, and Elena Loukoianova. 2007. Bank Ownership, Market Structure and Risk. Washington, DC: International Monetary Fund, vol. 2007. [Google Scholar]
- Demsetz, Rebecca S., Marc R. Saidenberg, and Philip E. Strahan. 1997. Agency Problems and Risk Taking at Banks. FRB of New York Staff Report. New York: Federal Reserve Bank of New York. [Google Scholar]
- Fu, Xiaoqing Maggie, Yongjia Rebecca Lin, and Philip Molyneux. 2014. Bank competition and financial stability in Asia Pacific. Journal of Banking & Finance 38: 64–77. [Google Scholar]
- Gupta, Anupam Das, and Afsana Yesmin. 2022. Effect of risk and market competition on efficiency of commercial banks: Does ownership matter? Journal of Business Economics and Finance 11: 22–42. [Google Scholar] [CrossRef]
- Hansen, Lars P. 1982. Large Sample Properties of Generalized Method of Moments Estimators. Econometrica 50: 1029. [Google Scholar] [CrossRef]
- Hao, Zezhong, Xiuwu Zhang, and Jiangying Wei. 2022. Research on the effect of enterprise financial flexibility on sustainable innovation. Journal of Innovation & Knowledge 7: 100184. [Google Scholar]
- Hope, Christopher James, Tendai Gwatidzo, and Miracle Ntuli. 2013. Investigating The Effect Of Bank Competition On Financial Stability In Ten African Countries. International Business & Economics Research Journal (IBER) 12: 755. [Google Scholar]
- Houston, Joel F., and Christopher James. 1995. CEO compensation and bank risk Is compensation in banking structured to promote risk taking? Journal of Monetary Economics 36: 405–31. [Google Scholar] [CrossRef]
- Kasman, Saadet, and Adnan Kasman. 2015. Bank competition, concentration and financial stability in the Turkish banking industry. Economics Systems 39: 502–17. [Google Scholar] [CrossRef]
- Keeley, Michael C. 1990. Deposit insurance, risk, and market power in banking. The American Economic Review 80: 1183–200. [Google Scholar]
- Kennedy, Peter. 2008. A Guide to Econometrics. Hoboken: John Wiley & Sons. [Google Scholar]
- Kobeissi, Nada, and Xian Sun. 2010. Ownership Structure and Bank Performance: Evidence from the Middle East and North Africa Region. Comparative Economic Studies 52: 287–323. [Google Scholar] [CrossRef]
- Koetter, Michael, James W. Kolari, and Laura Spierdijk. 2012. Enjoying the Quiet Life under Deregulation? Evidence from Adjusted Lerner Indices for U.S. Banks. The Review of Economics and Statistics 94: 462–80. [Google Scholar] [CrossRef]
- Le, Tu D. Q., and Dat T. Nguyen. 2020. Intellectual capital and bank profitability: New evidence from Vietnam. Cogent Business & Management 7: 1859666. [Google Scholar]
- Leroy, Aurélien, and Yannick Lucotte. 2017. Is there a competition-stability trade-off in European banking? Journal of International Financial Markets, Institutions and Money 46: 199–215. [Google Scholar] [CrossRef]
- Levine, Ross. 1997. Financial development and economic growth: Views and agenda. Journal of Economic Literature 35: 688–726. [Google Scholar]
- Mdaghri, Anas Alaoui, and Lahsen Oubdi. 2021. Basel III liquidity regulatory framework and bank liquidity creation in MENA countries. Journal of Financial Regulation and Compliance 30: 129–48. [Google Scholar] [CrossRef]
- Moudud-Ul-Huq, Syed, Abdul Halim, and Tanmay Biswas. 2020. Competition and Profitability of Banks: Empirical evidence from the Middle East & North African (MENA) Countries. Journal of Business Administration Research 3: 26–37. [Google Scholar]
- Moudud-Ul-Huq, Syed, Tanmay Biswas, Abdul Halim, Miroslav Mateev, Imran Yousaf, and Mohammad Zoynul Abedin. 2021. The effects of bank competition, financial stability and ownership structure: Evidence from the Middle East and North African (MENA) countries. International Journal of Islamic and Middle Eastern Finance and Management 15: 717–38. [Google Scholar] [CrossRef]
- Moudud-Ul-Huq, Syed. 2020. Does bank competition matter for performance and risk-taking? empirical evidence from BRICS countries. International Journal of Emerging Markets 16: 409–47. [Google Scholar] [CrossRef]
- Noman, Abu Hanifa Md., Chan Sok Gee, and Che Ruhana Isa. 2018. Does bank regulation matter on the relationship between competition and financial stability? Evidence from Southeast Asian countries. Pacific-Basin Finance Journal 48: 144–61. [Google Scholar] [CrossRef]
- Olmo, Begoña Torre, María Cantero Saiz, and Sergio Sanfilippo Azofra. 2021. Sustainable Banking, Market Power, and Efficiency: Effects on Banks’ Profitability and Risk. Sustainability 13: 1298. [Google Scholar] [CrossRef]
- Panzar, John C., and James N. Rosse. 1987. Testing for” monopoly” equilibrium. The Journal of Industrial Economics 35: 443–56. [Google Scholar] [CrossRef]
- Sapienza, Paola. 2004. The effects of government ownership on bank lending. Journal of Financial Economics 72: 357–84. [Google Scholar] [CrossRef][Green Version]
- Saunders, Anthony, Elizabeth Strock, and Nickolaos G. Travlos. 1990. Ownership structure, deregulation, and bank risk taking. The Journal of Finance 45: 643–54. [Google Scholar] [CrossRef]
- Schaeck, Klaus, Martin Cihak, and Simon Wolfe. 2009. Are competitive banking systems more stable? Journal of Money, Credit and Banking 41: 711–34. [Google Scholar] [CrossRef][Green Version]
- Soedarmono, Wahyoe, Fouad Machrouh, and Amine Tarazi. 2013. Bank competition, crisis and risk taking: Evidence from emerging markets in Asia. Journal of International Financial Markets, Institutions and Money 23: 196–221. [Google Scholar] [CrossRef][Green Version]
- Tan, Yong, and John Anchor. 2017. Does competition only impact on insolvency risk? New evidence from the Chinese banking industry. International Journal of Managerial Finance 13: 332–54. [Google Scholar] [CrossRef]
- Tan, Yong, Marco Chi Keung Lau, and Giray Gozgor. 2020. Competition and Profitability: Impacts on Stability in Chinese Banking. International Journal of the Economics of Business 28: 197–220. [Google Scholar] [CrossRef]
- Tan, Yong. 2016a. The impacts of risk and competition on bank profitability in China. Journal of International Financial Markets, Institutions and Money 40: 85–110. [Google Scholar] [CrossRef][Green Version]
- Tan, Yong. 2016b. The Measurement of Bank Efficiency and Bank Risk in China. In Investigating the Performance of Chinese Banks: Efficiency and Risk Features. Berlin and Heidelberg: Springer, pp. 105–28. [Google Scholar]
- Tan, Yong. 2019. Competition and Profitability in the Chinese Banking Industry: New Evidence from Different Ownership Types. Journal of Industry, Competition and Trade 20: 503–26. [Google Scholar] [CrossRef]
- Thompson, Christopher Glen, Rae Seon Kim, Ariel M. Aloe, and Betsy Jane Becker. 2017. Extracting the Variance Inflation Factor and Other Multicollinearity Diagnostics from Typical Regression Results. Basic and Applied Social Psychology 39: 81–90. [Google Scholar] [CrossRef]
- Yaldiz, Elmas, and Flavio Bazzana. 2010. The effect of market power on bank risk taking in Turkey. Financial Theory and Practice 34: 297–314. [Google Scholar]
- Yeyati, Eduardo Levy, and Alejandro Micco. 2007. Concentration and foreign penetration in Latin American banking sectors: Impact on competition and risk. Journal of Banking & Finance 31: 1633–164. [Google Scholar]
- Zhao, Tianshu, Barbara Casu, and Alessandra Ferrari. 2010. The impact of regulatory reforms on cost structure, ownership and competition in Indian banking. Journal of Banking & Finance 34: 246–54. [Google Scholar]
- Zheng, Changjun, Md. Abdul Halim, Najmul Hasan, and Md. Abdul Halim. 2022. Does intellectual capital efficiency matter for banks’ performance and risk-taking behavior? Cogent Economics & Finance 10: 2127484. [Google Scholar]
- Zheng, Chao. 2022. An innovative MS-VAR model with integrated financial knowledge for measuring the impact of stock market bubbles on financial security. Journal of Innovation & Knowledge 7: 100207. [Google Scholar]

Null Hypothesis (H_{0}): NPL Has a Unit Root | |||||
---|---|---|---|---|---|

Level | t | p-Value | Decision | Test | |

ADF test statistic | −27.5319 | 0.000 | Rejected at 1% | Level | |

Test critical values (TCV): | 1% | −3.43888 | |||

5% | −2.86519 | ||||

10% | −2.56877 | ||||

H_{0}: Z-score has a unit root | |||||

ADF test statistic | −25.61629 | 0.000 | Rejected at 1% | Level | |

TCV | 1% | −3.438877 | |||

5% | −2.865193 | ||||

10% | −2.568771 | ||||

H_{0}: LERNER has a unit root | |||||

ADF test statistic | −24.3247 | 0.000 | Rejected at 1% | Level | |

TCV | 1% | −3.43888 | |||

5% | −2.86519 | ||||

10% | −2.56877 | ||||

H_{0}: HHIA has a unit root | |||||

ADF test statistic | −15.2717 | 0.000 | Rejected at 1% | Level | |

TCV | 1% | −3.43888 | |||

5% | −2.86519 | ||||

10% | −2.56877 | ||||

H_{0}: HHIL has a unit root | |||||

ADF test statistic | −18.3796 | 0.000 | Rejected at 1% | Level | |

TCV | 1% | −3.43888 | |||

5% | −2.86519 | ||||

10% | −2.56877 | ||||

H_{0}: LC has a unit root | |||||

ADF test statistic | −10.5058 | 0.000 | Rejected at 1% | Level | |

TCV | 1% | −3.43891 | |||

5% | −2.86521 | ||||

10% | −2.56878 | ||||

H_{0}: LQ has a unit root | |||||

−26.9711 | 0.000 | Rejected at 1% | Level | ||

1% | −3.4389 | ||||

5% | −2.8652 | ||||

10% | −2.56878 | ||||

H_{0}: SIZE has a unit root | |||||

ADF test statistic | −5.8236 | 0.000 | Rejected at 1% | Level | |

TCV | 1% | −3.43891 | |||

5% | −2.86521 | ||||

10% | −2.56878 | ||||

H_{0}: CUST has a unit root | |||||

ADF test statistic | −13.3324 | 0.000 | Rejected at 1% | Level | |

TCV | 1% | −3.4389 | |||

5% | −2.8652 | ||||

10% | −2.56878 | ||||

H_{0}: D(ISB) has a unit root | |||||

ADF test statistic | −27.2764 | 0.000 | Rejected at 1% | I(1) (first Difference) | |

TCV | 1% | −3.43889 | |||

5% | −2.8652 | ||||

10% | −2.56877 | ||||

H_{0}: D(CB) has a unit root | |||||

ADF test statistic | −27.2764 | 0.000 | Rejected at 1% | I(1) | |

TCV | 1% | −3.43889 | |||

5% | −2.8652 | ||||

10% | −2.56877 | ||||

H_{0}: SGI has a unit root | |||||

ADF test statistic | −2.89598 | 0.0463 | Rejected at 5% | Level | |

TCV | 1% | −3.43888 | |||

5% | −2.86519 | ||||

10% | −2.56877 | ||||

H_{0}: D(GGDP) has a unit root | |||||

ADF test statistic | −18.3419 | 0.000 | Rejected at 1% | Level | |

TCV | 1% | −3.43922 | |||

5% | −2.86534 | ||||

10% | −2.56885 | ||||

H_{0}: INFLATION has a unit root | |||||

ADF test statistic | −2.96006 | 0.0393 | Rejected at 5% | Level | |

TCV | 1% | −3.43902 | |||

5% | −2.86526 | ||||

10% | −2.56881 |

Obs | Min | Max | Mean | Std. Deviation | Skew | Kurto | |||
---|---|---|---|---|---|---|---|---|---|

Stat | Stat | Stat | Stat | Stat | Stat | Std. Error | Stat | Std. Error | |

NPL | 748.000 | 0.060 | 82.650 | 7.131 | 9.447 | 3.310 | 0.089 | 13.781 | 0.179 |

Z-score | 748.000 | −2.411 | 255.392 | 30.858 | 29.378 | 2.769 | 0.089 | 12.856 | 0.179 |

Lerner | 748.000 | 0.004 | 0.178 | 0.157 | 0.027 | −2.735 | 0.089 | 9.472 | 0.179 |

HHIA | 748.000 | 0.000 | 0.996 | 0.213 | 0.233 | 1.334 | 0.089 | 0.938 | 0.179 |

HHIL | 748.000 | 0.002 | 0.981 | 0.258 | 0.205 | 1.176 | 0.089 | 1.096 | 0.179 |

LC | 748.000 | 0.106 | 7895.036 | 198.204 | 626.363 | 7.879 | 0.089 | 74.294 | 0.179 |

LQ | 747.000 | 0.050 | 51.740 | 5.485 | 5.417 | 3.675 | 0.089 | 21.266 | 0.179 |

SIZE | 748.000 | 808.538 | 1868.333 | 1469.179 | 207.426 | −0.876 | 0.089 | 0.742 | 0.179 |

CUST | 748.000 | 0.150 | 3657.850 | 57.838 | 186.109 | 14.949 | 0.089 | 252.298 | 0.179 |

ISB | 748.000 | 0.000 | 1.000 | 0.318 | 0.466 | 0.782 | 0.089 | −1.392 | 0.179 |

CB | 748.000 | 0.000 | 1.000 | 0.616 | 0.487 | −0.479 | 0.089 | −1.775 | 0.179 |

SGI | 748.000 | 0.000 | 1.000 | 0.127 | 0.573 | 0.815 | 0.089 | −1.192 | 0.179 |

GGDP | 747.000 | −25.900 | 18.220 | 0.980 | 6.402 | −1.353 | 0.089 | 5.306 | 0.179 |

Inflation | 748.000 | −3.730 | 84.860 | 5.539 | 12.940 | 4.850 | 0.089 | 26.068 | 0.179 |

NPL | Z-Score | Lerner | HHIA | HHIL | LC | LQ | SIZE | CUST | ISB | CB | SGI | GGDP | Inflation | |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|

1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | |

1 | 1 | |||||||||||||

2 | −0.005 | 1 | ||||||||||||

3 | 0.023 | −0.013 | 1 | |||||||||||

4 | −0.036 | 0.044 | 0.093 * | 1 | ||||||||||

5 | 0.003 | 0.036 | 0.023 | −0.0035 | 1 | |||||||||

6 | 0.028 | −0.049 | −0.133 ** | −0.037 | 0.023 | 1 | ||||||||

7 | 0.013 | −0.023 | 0.016 | 0.016 | 0.044 | 0.053 | 1 | |||||||

8 | 0.012 | 0.083 * | −0.102 ** | 0.164 ** | 0.014 | −0.030 | 0.013 | 1 | ||||||

9 | 0.033 | 0.010 | −0.060 | −0.048 | 0.017 | 0.150 ** | −0.008 | −0.042 | 1 | |||||

10 | −0.045 | −0.032 | −0.050 | −0.123 ** | −0.038 | 0.059 | −0.045 | −0.187 ** | 0.043 | 1 | ||||

11 | 0.048 | 0.088 * | 0.026 | 0.105 ** | 0.014 | −0.033 | 0.056 | 0.173 ** | −0.033 | −0.566 ** | 1 | |||

12 | −0.011 | −0.113 ** | 0.044 | 0.025 | 0.044 | −0.047 | −0.025 | 0.012 | −0.016 | −0.181 ** | −0.336 ** | 1 | ||

13 | 0.023 | 0.107 ** | −0.003 | 0.030 | −0.029 | −0.007 | −0.030 | 0.281 ** | −0.046 | −0.106 ** | 0.131 ** | −0.058 | 1 | |

14 | 0.064 | −0.021 | 0.000 | −0.033 | 0.055 | 0.034 | 0.073 * | −0.102 ** | 0.068 | 0.036 | −0.051 | 0.033 | −0.532 ** | 1 |

Model | Coefficients | Coefficients | t | Sig. | Collinearity Statistics | |||
---|---|---|---|---|---|---|---|---|

B | Std. Error | Beta | VIF | |||||

Constant Variables | 5.077 | 3.582 | 1.418 | 0.157 | ||||

Lerner | 10.155 | 12.568 | 0.030 | 0.808 | 0.419 | 1.750 | ||

HHIA | −1.516 | 1.519 | −0.038 | −0.998 | 0.318 | 1.054 | ||

HHIL | −0.258 | 1.686 | −0.006 | −0.153 | 0.879 | 1.011 | ||

LC | 0.000 | 0.001 | 0.027 | 0.720 | 0.472 | 1.049 | ||

LQ | 0.006 | 0.064 | 0.003 | 0.087 | 0.930 | 1.014 | ||

SIZE | 0.000 | 0.002 | 0.006 | 0.155 | 0.877 | 1.167 | ||

CUST | 0.001 | 0.002 | 0.027 | 0.717 | 0.474 | 1.032 | ||

ISB | −0.936 | 0.774 | −0.046 | −1.210 | 0.227 | 1.096 | ||

CB | −1.662 | 0.384 | −0.026 | −0.599 | 0.385 | 1.003 | ||

SGI | −0.620 | 1.422 | −0.016 | −0.436 | 0.663 | 1.046 | ||

GGDP | 0.106 | 0.066 | 0.072 | 1.598 | 0.110 | 1.520 | ||

Inflation | 0.074 | 0.032 | 0.101 | 2.326 | 0.020 | 1.416 | ||

Dependent Variable: NPL | ||||||||

Model | Coefficients | Coefficients | t | Sig. | Collinearity Statistics | |||

B | Std. Error | Beta | VIF | |||||

Constant Variables | 22.683 | 11.038 | 2.055 | 0.040 | ||||

Lerner | −16.027 | 38.736 | −0.015 | −0.414 | 0.679 | 1.050 | ||

HHIA | 5.106 | 4.680 | 0.041 | 1.091 | 0.276 | 1.054 | ||

HHIL | 6.207 | 5.197 | 0.044 | 1.194 | 0.233 | 1.011 | ||

LC | −0.003 | 0.002 | −0.055 | −1.491 | 0.136 | 1.049 | ||

LQ | −0.154 | 0.197 | −0.028 | −0.778 | 0.437 | 1.014 | ||

SIZE | 0.006 | 0.006 | 0.046 | 1.175 | 0.240 | 1.167 | ||

CUST | 0.003 | 0.006 | 0.021 | 0.567 | 0.571 | 1.032 | ||

ISB | −1.665 | 20.384 | −0.026 | −0.699 | 0.485 | 1.096 | ||

CB | −0.662 | 0.284 | −0.027 | −0.583 | 0.652 | 1.007 | ||

SGI | −14.081 | 4.382 | −0.119 | −3.214 | 0.001 | 1.046 | ||

GGDP | 0.503 | 0.204 | 0.110 | 2.461 | 0.014 | 1.520 | ||

Inflation | 0.108 | 0.098 | 0.048 | 1.109 | 0.268 | 1.416 |

**Table 5.**Effects of competition (based on the Lerner index), loan quality and ownership structure on credit risk.

Variable | Coefficient | t | p. | Coefficient | t | p. | Coefficient | t | p. |
---|---|---|---|---|---|---|---|---|---|

Model 1 | Model 2 | Model 3 | |||||||

NPL_{(t-1)} | 0.172 | 6.190 | 0.000 | 0.032 | 7.180 | 0.000 | 0.071 | 7.502 | 0.000 |

LERNER | −0.015 | 5.381 | 0.000 | −0.011 | 4.702 | 0.000 | −0.107 | −3.205 | 0.004 |

ISB | −0.760 | −2.124 | 0.001 | ||||||

CB | −0.780 | −2.181 | 0.008 | ||||||

SGI | −0.213 | −0.163 | 0.101 | ||||||

LC | 0.000 | 2.304 | 0.001 | 0.000 | 2.298 | 0.016 | 0.000 | 2.070 | 0.004 |

LQ | 0.005 | 2.071 | 0.004 | −0.001 | −4.017 | 0.087 | 0.006 | 4.082 | 0.000 |

SIZE | 0.000 | 3.085 | 0.002 | 0.000 | 2.115 | 0.018 | 0.000 | 2.077 | 0.039 |

CUST | 0.001 | 4.522 | 0.002 | 0.001 | 4.529 | 0.007 | 0.001 | 2.485 | 0.028 |

GGDP | −0.105 | −2.601 | 0.010 | −0.112 | −3.692 | 0.001 | −0.103 | −1.544 | 0.123 |

INFLATION | 0.069 | 2.709 | 0.088 | 0.074 | 2.829 | 0.068 | 0.071 | 1.733 | 0.083 |

C | 5.386 | 2.634 | 0.103 | 0.786 | 4.441 | 0.050 | 5.352 | 1.619 | 0.106 |

Sargan’s J test (p-value) | 0.873 | 0.891 | 0.827 | ||||||

AR—(1) | 0.000 | 0.001 | 0.000 | ||||||

AR—(2) | 0.497 | 0.543 | 0.492 | ||||||

R^{2} | 0.482 | 0.520 | 0.380 | ||||||

Adj-R^{2} | 0.471 | 0.485 | 0.371 | ||||||

Instrument rank | 13.000 | 13.000 | 13.000 |

_{(t-1)}. The GMM method was used to obtain these results. R

^{2}= R-squared, Adj-R

^{2}= Adjusted R-squared. t = t-statistic. p. = probability value.

**Table 6.**Effects of competition (Based on HHIA), loan quality and ownership structure on credit risk.

Variable | Coefficient | t | p. | Coefficient | t | p. | Coefficient | t | p. |
---|---|---|---|---|---|---|---|---|---|

Model 1 | Model 2 | Model 3 | |||||||

NPL_{(t-1)} | 0.102 | 2.836 | 0.000 | 0.009 | 6.050 | 0.000 | 0.007 | 4.142 | 0.000 |

HHIA | −0.007 | −7.073 | 0.000 | −0.082 | −8.207 | 0.000 | −0.009 | −7.001 | 0.000 |

ISB | −0.900 | −2.187 | 0.036 | ||||||

CB | 0.894 | 3.234 | 0.018 | ||||||

SGI | −0.267 | −2.191 | 0.032 | ||||||

LC | 0.000 | 2.636 | 0.025 | 0.000 | 2.609 | 0.003 | 0.000 | 3.567 | 0.071 |

LQ | 0.007 | 4.113 | 0.010 | 0.006 | 4.097 | 0.023 | 0.010 | 4.162 | 0.071 |

SIZE | 0.000 | 2.045 | 0.004 | 0.000 | 2.061 | 0.051 | 0.000 | 3.223 | 0.024 |

CUST | 0.001 | 3.688 | 0.002 | 0.001 | 2.681 | 0.006 | 0.001 | 2.659 | 0.010 |

GGDP | −0.110 | −1.657 | 0.008 | −0.107 | −1.622 | 0.105 | −0.114 | −1.717 | 0.186 |

INFLATION | 0.074 | 2.334 | 0.020 | 0.074 | 2.338 | 0.020 | 0.074 | 2.355 | 0.019 |

C | 0.866 | 2.582 | 0.010 | 5.993 | 2.327 | 0.020 | 6.087 | 2.361 | 0.019 |

Sargan’s J test (p-value) | 0.838 | 0.865 | 0.529 | ||||||

AR—(1) | 0.001 | 0.000 | 0.002 | ||||||

AR—(2) | 0.417 | 0.471 | 0.462 | ||||||

R^{2} | 0.313 | 0.313 | 0.311 | ||||||

Adj-R^{2} | 0.302 | 0.302 | 0.300 | ||||||

Instrument rank | 13.000 | 13.000 | 13.000 |

_{(t−1)}. The GMM method was used to obtain these results.

**Table 7.**Effects of competition (based on HHIL), loan quality and ownership structure on credit risk.

Variable | Coefficient | t | p. | Coefficient | t | p. | Coefficient | t | p. |
---|---|---|---|---|---|---|---|---|---|

Model 1 | Model 2 | Model 3 | |||||||

NPL_{(t-1)} | 0.132 | 2.136 | 0.000 | 0.005 | 5.063 | 0.000 | 0.000 | 3.830 | 0.000 |

HHIL | −0.002 | −5.108 | 0.000 | −0.004 | −7.013 | 0.000 | −0.017 | −6.019 | 0.003 |

ISB | −0.756 | −2.108 | 0.068 | ||||||

CB | 0.843 | 3.166 | 0.044 | ||||||

SGI | −0.287 | −2.205 | 0.037 | ||||||

LC | 0.001 | 2.659 | 0.010 | 0.000 | 3.633 | 0.027 | 0.000 | 3.590 | 0.056 |

LQ | 0.064 | 2.106 | 0.016 | 0.006 | 2.089 | 0.029 | 0.010 | 2.151 | 0.080 |

SIZE | 0.002 | 5.088 | 0.030 | 0.000 | 5.073 | 0.002 | 0.000 | 2.096 | 0.024 |

CUST | 0.002 | 2.720 | 0.002 | 0.001 | 3.713 | 0.076 | 0.001 | 0.688 | 0.092 |

GGDP | −0.066 | −1.689 | 0.092 | −0.109 | −1.654 | 0.099 | −0.115 | −1.740 | 0.182 |

INFLATION | 0.032 | 2.364 | 0.018 | 0.075 | 2.366 | 0.018 | 0.075 | 2.378 | 0.018 |

C | 2.688 | 2.578 | 0.010 | 6.106 | 2.348 | 0.019 | 6.178 | 2.375 | 0.018 |

Sargan’s J test (p-value) | 0.642 | 0.405 | 0.414 | ||||||

AR—(1) | 0.000 | 0.000 | 0.000 | ||||||

AR—(2) | 0.423 | 0.472 | 0.402 | ||||||

R^{2} | 0.311 | 0.301 | 0.310 | ||||||

Adj-R^{2} | 0.300 | 0.544 | −0.301 | ||||||

Instrument rank | 13.000 | 13.000 | 13.000 |

_{(t-1)}. The GMM method was used to obtain these results.

**Table 8.**Effects of competition (based on Lerner index), loan quality and ownership structure on financial stability.

Variable | Coefficient | t | p. | Coefficient | t | p. | Coefficient | t | p. |
---|---|---|---|---|---|---|---|---|---|

Model-1 | Model-2 | Model-3 | |||||||

Z-score_{(t-1)} | 0.032 | 2.836 | 0.000 | 0.105 | 4.003 | 0.000 | 0.109 | 7.030 | 0.000 |

LERNER | 0.014 | 6.028 | 0.000 | 0.005 | 3.073 | 0.012 | 0.019 | 5.270 | 0.000 |

ISB | 0.181 | 2.526 | 0.009 | ||||||

CB | 0.141 | 2.957 | 0.003 | ||||||

SGI | −0.093 | −5.554 | 0.000 | ||||||

LC | −0.002 | −2.698 | 0.007 | −0.002 | −2.627 | 0.009 | −0.003 | −2.976 | 0.003 |

LQ | −0.137 | −4.706 | 0.000 | −0.254 | −3.310 | 0.091 | −0.182 | −3.958 | 0.008 |

SIZE | 0.008 | 5.540 | 0.024 | 0.003 | 2.541 | 0.089 | 0.010 | 1.960 | 0.050 |

CUST | −0.004 | −2.848 | 0.065 | −0.004 | −3.961 | 0.050 | −0.003 | −1.528 | 0.127 |

GGDP | 0.530 | 3.394 | 0.001 | 0.479 | 3.109 | 0.002 | 0.466 | 3.008 | 0.003 |

INFLATION | −0.107 | −1.359 | 0.175 | −0.094 | −1.211 | 0.227 | −0.111 | −1.417 | 0.157 |

C | 19.894 | 1.799 | 0.072 | 26.774 | 2.612 | 0.009 | 19.382 | 1.883 | 0.060 |

Sargan’s J test (p-value) | 0.916 | 0.937 | 0.863 | ||||||

AR—(1) | 0.000 | 0.000 | 0.000 | ||||||

AR—(2) | 0.452 | 0.461 | 0.495 | ||||||

R^{2} | 0.317 | 0.021 | 0.332 | ||||||

Adj-R^{2} | 0.307 | 0.011 | 0.321 | ||||||

Instrument rank | 13.000 | 13.000 | 13.000 |

_{(t-1)}. The GMM method was used to obtain these results.

**Table 9.**Effects of competition (based on HHIA), loan quality and ownership structure on financial stability.

Variable | Coefficient | t | p. | Coefficient | t | p. | Coefficient | t | p. |
---|---|---|---|---|---|---|---|---|---|

Model 1 | Model 2 | Model 3 | |||||||

Z-score_{(t-1)} | 0.031 | 3.136 | 0.000 | 0.001 | 3.078 | 0.000 | 0.009 | 4.530 | 0.000 |

HHIA | 0.007 | 2.407 | 0.004 | 0.192 | 2.242 | 0.009 | 0.660 | 3.748 | 0.000 |

ISB | 0.305 | 2.580 | 0.002 | ||||||

CB | 0.996 | 2.883 | 0.004 | ||||||

SGI | −0.380 | −5.626 | 0.000 | ||||||

LC | −0.002 | −2.704 | 0.007 | −0.002 | −2.569 | 0.010 | −0.003 | −3.030 | 0.003 |

LQ | −0.132 | −3.681 | 0.006 | −0.249 | −3.285 | 0.099 | −0.177 | −2.927 | 0.014 |

SIZE | 0.008 | 3.589 | 0.013 | 0.003 | 2.623 | 0.033 | 0.010 | 1.994 | 0.047 |

CUST | −0.004 | −1.930 | 0.054 | −0.004 | −2.004 | 0.046 | −0.003 | −1.642 | 0.101 |

GGDP | 0.533 | 3.405 | 0.001 | 0.477 | 3.087 | 0.002 | 0.465 | 2.995 | 0.003 |

INFLATION | −0.111 | −1.417 | 0.157 | −0.097 | −1.261 | 0.208 | −0.111 | −1.435 | 0.152 |

C | 16.554 | 2.075 | 0.038 | 21.948 | 3.098 | 0.002 | 16.640 | 2.344 | 0.019 |

Sargan’s J test (p-value) | 0.900 | 0.902 | 0.630 | ||||||

AR—(1) | 0.000 | 0.003 | 0.000 | ||||||

AR—(2) | 0.428 | 0.403 | 0.474 | ||||||

R^{2} | 0.318 | 0.322 | 0.333 | ||||||

Adj-R^{2} | 0.308 | 0.311 | 0.323 | ||||||

Instrument rank | 13.000 | 13.000 | 13.000 |

_{(t-1)}. The GMM method was used to obtain these results.

**Table 10.**Effects of competition (based on HHIL), loan quality and ownership structure on financial stability.

Variable | Coefficient | t | p. | Coefficient | t | p. | Coefficient | t | p. |
---|---|---|---|---|---|---|---|---|---|

Model 1 | Model 2 | Model 3 | |||||||

Z-score_{(t-1)} | 0.001 | 3.036 | 0.000 | 0.201 | 5.178 | 0.000 | 0.018 | 3.160 | 0.000 |

HHIL | 0.568 | 4.694 | 0.008 | 0.744 | 3.924 | 0.006 | 0.995 | 2.978 | 0.029 |

ISB | 0.158 | 2.516 | 0.006 | ||||||

CB | 0.204 | 2.971 | 0.003 | ||||||

SGI | −0.321 | −5.654 | 0.000 | ||||||

LC | −0.002 | −2.737 | 0.006 | −0.002 | −2.580 | 0.010 | 0.003 | 3.073 | 0.002 |

LQ | −0.114 | −3.588 | 0.057 | −0.225 | −2.157 | 0.048 | −0.148 | −2.773 | 0.040 |

SIZE | 0.007 | 2.420 | 0.056 | 0.002 | 2.391 | 0.096 | 0.009 | 1.754 | 0.080 |

CUST | −0.004 | 3.721 | −0.086 | 0.004 | −1.819 | −0.069 | −0.003 | −1.390 | 0.165 |

GGDP | 0.548 | 3.443 | 0.001 | 0.504 | 3.211 | 0.001 | 0.497 | 3.148 | 0.002 |

INFLATION | −0.106 | −1.342 | 0.180 | −0.095 | −1.227 | 0.220 | −0.109 | −1.400 | 0.162 |

C | 17.091 | 2.169 | 0.030 | 22.380 | 3.193 | 0.002 | 17.447 | 2.490 | 0.013 |

Sargan’s J test (p-value) | 0.800 | 0.902 | 0.695 | ||||||

AR—(1) | 0.000 | 0.001 | 0.000 | ||||||

AR—(2) | 0.401 | 0.427 | 0.495 | ||||||

R^{2} | 0.319 | 0.322 | 0.334 | ||||||

Adj-R^{2} | 0.308 | 0.312 | 0.323 | ||||||

Instrument rank | 13.000 | 13.000 | 13.000 |

_{(t-1)}. The GMM method was used to obtain these results.

**Table 11.**Bidirectional causality of competition and risk concerning the impact of ownership structure.

Variable | Coefficient | t | p. | Coefficient | t | p. | Coefficient | t | p. |
---|---|---|---|---|---|---|---|---|---|

Dependent Variable = Lerner | Dependent Variable = HHIA | Dependent Variable = HHIL | |||||||

Lerner_{(t-1)} | 0.071 | 8.073 | 0.000 | ||||||

HHIA_{(t-1)} | 0.042 | 3.002 | 0.000 | ||||||

HHIL_{(t-1)} | 0.063 | 6.001 | 0.000 | ||||||

NPL | −0.072 | −6.450 | 0.000 | −0.001 | −2.707 | 0.080 | −0.018 | −5.115 | 0.000 |

ZSCORE | 0.028 | 3.290 | 0.016 | 0.040 | 3.861 | 0.009 | 0.029 | 4.164 | 0.045 |

LC | 0.001 | 2.901 | 0.058 | 0.027 | 2.089 | 0.076 | 0.018 | 3.450 | 0.053 |

LQ | 0.041 | 2.568 | 0.070 | 0.001 | 7.825 | 0.000 | 0.032 | 6.897 | 0.000 |

SIZE | 0.100 | 3.433 | 0.001 | 0.019 | 4.140 | 0.000 | 0.037 | 6.253 | 0.000 |

CUST | 0.023 | 2.114 | 0.066 | 0.016 | 2.439 | 0.051 | 0.104 | 5.672 | 0.002 |

ISB | −0.116 | −2.787 | 0.074 | −0.049 | −4.688 | 0.007 | −0.047 | −5.393 | 0.019 |

CB | −0.102 | −5.724 | 0.000 | −0.003 | −5.094 | 0.000 | −0.035 | −2.081 | 0.080 |

SGI | 0.002 | 0.724 | 0.470 | 0.203 | 0.094 | 0.125 | 0.010 | 0.135 | 0.192 |

GGDP | 0.010 | 1.927 | 0.155 | 0.001 | 1.949 | 0.143 | 0.001 | 1.063 | 0.288 |

INFLATION | −0.000 | −3.371 | 0.010 | −0.001 | −2.910 | 0.063 | −0.256 | −3.780 | 0.000 |

C | 0.193 | 24.132 | 0.000 | −0.027 | −0.447 | 0.655 | 0.012 | 0.098 | 0.286 |

Sargan’s J test (p-value) | 0.917 | 0.925 | 0.824 | ||||||

AR—(1) | 0.000 | 0.001 | 0.002 | ||||||

AR—(2) | 0.593 | 0.484 | 0.397 | ||||||

R^{2} | 0.492 | 0.440 | 0.410 | ||||||

Adj-R^{2} | 0.481 | 0.427 | −0.403 | ||||||

Instrument rank | 14.000 | 14.000 | 14.000 |

Disclaimer/Publisher’s Note: The statements, opinions and data contained in all publications are solely those of the individual author(s) and contributor(s) and not of MDPI and/or the editor(s). MDPI and/or the editor(s) disclaim responsibility for any injury to people or property resulting from any ideas, methods, instructions or products referred to in the content. |

© 2023 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https://creativecommons.org/licenses/by/4.0/).

## Share and Cite

**MDPI and ACS Style**

Moudud-Ul-Huq, S.; Halim, M.A.; Sobhani, F.A.; Karim, Z.; Nesa, Z. The Nexus of Competition, Loan Quality, and Ownership Structure for Risk-Taking Behaviour. *Risks* **2023**, *11*, 68.
https://doi.org/10.3390/risks11040068

**AMA Style**

Moudud-Ul-Huq S, Halim MA, Sobhani FA, Karim Z, Nesa Z. The Nexus of Competition, Loan Quality, and Ownership Structure for Risk-Taking Behaviour. *Risks*. 2023; 11(4):68.
https://doi.org/10.3390/risks11040068

**Chicago/Turabian Style**

Moudud-Ul-Huq, Syed, Md. Abdul Halim, Farid Ahammad Sobhani, Ziaul Karim, and Zinnatun Nesa. 2023. "The Nexus of Competition, Loan Quality, and Ownership Structure for Risk-Taking Behaviour" *Risks* 11, no. 4: 68.
https://doi.org/10.3390/risks11040068