This paper documents large cross-country variation in the relationship between bank competition and bank stability and explores market, regulatory and institutional features that can explain this variation. We show that an increase in competition will have a larger impact on banks’ fragility...

Recently, developing countries have witnessed a sharp increase in foreign bank participation. We examine the impact on banking outreach using newly gathered data for Mexico, where foreign bank participation rose from 2% to 83% of assets during 1997-2005. Country-, bank-, and...

Is financial innovation necessary for sustaining economic growth? To address this question, we build a Schumpeterian model in which entrepreneurs earn profits by inventing better goods and profit-maximizing financiers arise to screen entrepreneurs. The model has two novel features. First,...