Do competition and efficiency lead to bank stability? Evidence from Bangladesh

Abstract Financial deregulation after financial repression during 1980s and 1990s has stimulated a fierce competition among banks across the world. In pace with this, banking industry of Bangladesh is also experiencing an intense competition, since it composed large number banks. Considering this upsurge, our study aims to explore impact efficiency on stability Bangladeshi over 2009–2017. For exploring nexus, we calculate Boone indicator Z -score, construct index by principal component analysis, using bank-level data measure efficiency, respectively, analyze at different levels competition. We address endogeneity estimation employing two-step system GMM robustness checks. The findings suggest nonlinear competition–stability relationship, though contributes stability, moderated in presence Our are robust alternative measures control variables, which could be useful for policy makers formulate strategies policies maintain stability.