Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
9553887 | Journal of Banking & Finance | 2005 | 32 Pages |
Abstract
This paper uses a panel database of 251 banks in 36 countries to analyze the impact of bank regulation on bank charter value and risk-taking. After controlling for deposit insurance and for the quality of a country's contracting environment, the results indicate that regulatory restrictions increase banks' risk-taking incentives by reducing their charter value. Banks in countries with stricter regulation have a lower charter value, which increases their incentives to follow risky policies. These results corroborate a negative relation between regulatory restrictions and the stability of a banking system. Deposit insurance has a positive influence on bank charter value, mitigating the risk-shifting incentives it creates. This positive influence disappears when we control for the possible endogeneity of deposit insurance.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Francisco González,