How Does Bank Competition Affect Banking Stability? The Case of an Emerging Market

This paper examines the role of interbank competition on banking stability in Jordan, an emerging market. Using estimates measured by Lerner index, impact two important dimensions stability, namely, credit risk and liquidity risk. The empirical results suggest that effect differs according to dimension stability. After controlling for bank-level control variables macroeconomic conditions, market power index show increase price leads more taking from banks. On other hand, second (liquidity risk) implies improves position However, these hold only sample non-Islamic Islamic banks may face wider mismatch between its assets liabilities due inability use conventional debt instruments offered hence it keeps larger cash buffers compensate this extra