Arbeitspapier

On Risk, Leverage and Banks: Do highly Leveraged Banks take on Excessive Risk?

This paper deals with the relation between excessive risk taking and capital structure in banks. Examining a quarterly dataset of U.S. banks between 1993 and 2010, we find that equity is valued higher when more risky portfolios are chosen when leverage is high, and that more risk taking has a negative impact on valuation of the debt of highly leveraged banks. We find no evidence that deposit insurance is encouraging risk taking behaviour. We do find that banks with a more troubled loan portfolio take on more risk. Banks whose share price has slumped tend to gamblefor resurrection by increasing the riskiness of their asset portfolios. The results suggest that incentives embedded in the capital structure of banks contribute to systemic fragility, and so support the Basel III proposals towards less leverage and higher loss absorption capacity of capital.

Sprache
Englisch

Erschienen in
Series: Tinbergen Institute Discussion Paper ; No. 12-022/2/DSF31

Klassifikation
Wirtschaft
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Financial Institutions and Services: Government Policy and Regulation
Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
Thema
bank fragility
risk shifting
deposit insurance
gambles for resurrection
Bankrisiko
Kapitalstruktur
Einlagensicherung
Bank
USA

Ereignis
Geistige Schöpfung
(wer)
Koudstaal, Martin
van Wijnbergen, Sweder
Ereignis
Veröffentlichung
(wer)
Tinbergen Institute
(wo)
Amsterdam and Rotterdam
(wann)
2012

Handle
URN
urn:nbn:nl:ui:29-442104
Letzte Aktualisierung
10.03.2025, 11:44 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Koudstaal, Martin
  • van Wijnbergen, Sweder
  • Tinbergen Institute

Entstanden

  • 2012

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