Description

This paper uses an unbalanced panel cove ring ninety-three countries over the 1990-2002 period to study the empirical relationship betw een bank concentration and credit volatility. The paper finds that there is a strong negative relationship be tween loans concentration and credit sensitivity to external shocks. It also shows that th is result is robust to different samples, measures of concentration and economet ric techniques, and that this relationship is not driven by crisis episodes. These results are in line with the hypothesis that banks with a larger market share can intern alize the countercyclical effect s of expanding credit during recessions.