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<p class="MsoNormal"><span style="font-family:&quot;cambria&quot;,serif">The Department of Economics</span></p>

<p class="MsoNormal"><span style="font-family:&quot;cambria&quot;,serif">School of Social Sciences</span></p>

<p class="MsoNormal"><span style="font-family:&quot;cambria&quot;,serif">Ateneo de Manila University</span></p>

<p class="MsoNormal"><span style="font-family:&quot;cambria&quot;,serif"> </span></p>

<p class="MsoNormal"><span style="font-family:&quot;cambria&quot;,serif">Cordially invites you</span></p>

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<p class="MsoNormal"><span style="font-family:&quot;cambria&quot;,serif">To a dissertation’s defense </span></p>

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<p class="MsoNormal" style="text-align:center" align="center"><span style="font-family:&quot;cambria&quot;,serif;color:rgb(34,34,34);background:white none repeat scroll 0% 0%">“Does Bank Competition &amp; Concentration Lead to Financial
Stability?”</span><b><span> </span></b></p>

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<p class="MsoNormal"><span style="font-family:&quot;cambria&quot;,serif"> </span></p>

<p class="MsoNormal"><span style="font-family:&quot;cambria&quot;,serif">by Ms. Jovi C. Dacanay</span></p>

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<p class="MsoNormal"><span style="font-family:&quot;cambria&quot;,serif">on May 12, 2017 (Friday)</span></p>

<p class="MsoNormal"><span style="font-family:&quot;cambria&quot;,serif">at 10:00 a.m. – 12:00 p.m.</span></p>

<p class="MsoNormal"><span style="font-family:&quot;cambria&quot;,serif">Economics Department, Conference Room</span></p>

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<p class="MsoNormal"><span style="font-family:&quot;cambria&quot;,serif">Panel of examiners:</span></p>

<p class="MsoNormal" style="text-align:justify"><span style="font-family:&quot;cambria&quot;,serif">Alvin P. Ang, Ph.D.</span></p>

<p class="MsoNormal" style="text-align:justify"><span style="font-family:&quot;cambria&quot;,serif">Noel P. de Guzman, Ph.D.</span></p>

<p class="MsoNormal" style="text-align:justify"><span style="font-family:&quot;cambria&quot;,serif">Luis F. Dumlao, Ph.D. </span></p>

<p class="MsoNormal" style="text-align:justify"><span style="font-family:&quot;cambria&quot;,serif">Victor Abola, Ph.D. (UA &amp; P)</span></p>

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<p class="MsoNormal"><span style="font-family:&quot;cambria&quot;,serif">Adviser</span></p>

<p class="MsoNormal" style="text-align:justify"><span style="font-family:&quot;cambria&quot;,serif">Fernando T. Aldaba, Ph.D.</span></p>

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<p class="MsoNormal" style="text-align:justify"><span style="font-family:&quot;cambria&quot;,serif">Abstract:</span><span style="font-size:10pt;font-family:&quot;century gothic&quot;,sans-serif"> </span></p>

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<p class="MsoNormal" style="text-align:justify"><span style="font-family:&quot;cambria&quot;,serif">There is a current
debate in the banking literature regarding the effect of competition on the
financial stability of banks.<span>  </span>This study
shall verify the “competition-fragility” and the “competition-stability” views
within the context of imperfect competition and market concentration. With the
current financial environment of the Philippine banking industry, does bank
competition and concentration lead to financial stability?<span>  </span>An empirical verification of the presence of
imperfect competition and market concentration shall be done using the
traditional and non-traditional methods of industrial organization.<span>  </span>To test the competition-fragility and
competition-stability views, the Z-index (indicator for financial stability
vis-à-vis over-all bank risk exposure and insolvency), non-performing loans to
total loans ratio (indicator for portfolio risk), and, the equity to total
assets ratio (indicator for bank capitalization) were used as dependent
variables and regressed, using the generalized method of moments (GMM), with
measures of market power: adjusted Lerner index, Herfindahl-Hirschman Index or
HHI (for deposits and loans) and other bank-specific control variables,
following the methodology used by Berger et al 2009.<span>   </span>The GMM regression method allows a
correction for heteroscedasticity, weak serial correlation and endogeneity
through the use of robust estimators. The results show that with imperfect
competition, characterized by the presence of dominant and fringe banks, the
dominant banks are increasing their profit margins, through higher mark-ups,
and, decreasing their non-performing loans, lessening the probability of
insolvency thereby increasing the stability of the largest banks.<span>  </span>However, this strategy also exposes them to
higher default and market risks, thereby increasing bank fragility. Dominant
banks could have been in a position to lead the banking industry to improve
bank capitalization, thereby strengthening the buffer effect, through the
exercise of their market power.<span>  </span>Rather, improved
profit margins instead of improved bank capitalization was pursued.</span><span style="font-size:10pt;font-family:&quot;century gothic&quot;,sans-serif"><span>  </span></span></p>

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