Charter value and bank stability before and after the global financial crisis of 2007-2008

Abstract : We investigate how bank charter value affects risk for a sample of OECD banks by using standalone and systemic risk measures before (2000-2006), during (2007-2009) and after (2010-2013) the global financial crisis. Prior to the crisis bank charter value is positively associated withrisk-taking and systemic risk for very large ―too-big-too-fail‖ banks and large U.S. and European banks but such a relationship is inverted during and after the crisis. A deeper investigation shows that such a behavior before the crisis is mostly relevant for very large banks and large banks with high growth strategies. Banks' Business models also influence this relationship. In presence of strong diversification strategies, higher charter value increases standalone risk for very large banks. Conversely, for banks following a focus strategy, higher charter value amplifies systemic risk for very large banks and both standalone and systemic risk for large U.S. and European banks. Abstract We investigate how bank charter value affects risk for a sample of OECD banks by using standalone and systemic risk measures before (2000-2006), during (2007-2009) and after (2010-2013) the global financial crisis. Prior to the crisis bank charter value is positively associated withrisk-taking and systemic risk for very large ―too-big-too-fail‖ banks and large U.S. and European banks but such a relationship is inverted during and after the crisis. A deeper investigation shows that such a behavior before the crisis is mostly relevant for very large banks and large banks with high growth strategies. Banks' Business models also influence this relationship. In presence of strong diversification strategies, higher charter value increases standalone risk for very large banks. Conversely, for banks following a focus strategy, higher charter value amplifies systemic risk for very large banks and both standalone and systemic risk for large U.S. and European banks.
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https://hal-unilim.archives-ouvertes.fr/hal-01337601
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Soumis le : lundi 27 juin 2016 - 12:02:15
Dernière modification le : mercredi 28 février 2018 - 17:06:02
Document(s) archivé(s) le : mercredi 28 septembre 2016 - 11:04:28

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  • HAL Id : hal-01337601, version 1

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Yassine Bakkar, Clovis Rugemintwari, Amine Tarazi. Charter value and bank stability before and after the global financial crisis of 2007-2008 . 2016. ⟨hal-01337601v1⟩

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