Bank competition and credit risk: The case of Peru

Pozo J.; Rojas Y. · Journal of Financial Stability (2023) · DOI: 10.1016/j.jfs.2023.101119

Resumen

This paper studies empirically the relationship between competition in the loan market and credit risk in the Peruvian financial system. Our finding challenges the theoretical work of Martinez-Miera and Repullo (2010) that finds a U-shaped relationship between competition and risk-taking, as well as the empirical work of Jiménez et al. (2013) that provides evidence that supports this nonlinear relationship in a developed economy as Spain. In contrast, we find that in Peru the shape of the relationship between competition and credit risk is more complex and it depends on the competition measure.