Article ID Journal Published Year Pages File Type
7408976 Journal of Financial Stability 2018 35 Pages PDF
Abstract
Using data on publicly traded banks in 61 countries, we examine how the institutional environment affects the relationship between bank capital and system-wide fragility. Consistent with prior studies, we find that bank capital is associated with a reduction in the systemic risk contribution of individual banks. This effect is more pronounced for banks located in countries with less efficient public and private monitoring of financial institutions and in countries with lower levels of information availability. Overall, our findings suggest that capital can act as a substitute for a weak institutional environment in reducing systemic risk.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics, Econometrics and Finance (General)
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