Article ID Journal Published Year Pages File Type
980379 The Quarterly Review of Economics and Finance 2012 7 Pages PDF
Abstract

This paper examines the relation between bank charter value and risk taking. Using a sample of U.S. banks over the period 1990–2006, we find that the relation is U-shaped: as charter value increases, risk taking first decreases and then increases. This finding is robust across alternative measures of risk taking and an estimation method that accounts for the joint determination of charter value and risk taking.

► This paper examines the relation between bank charter value and risk taking. ► Five measures of risk taking are employed: total risk, systematic risk, firm specific risk, the ratio of nonperforming loans to total loans, and Z-score. ► The two-step system GMM estimator is used. ► A U-shaped relation between charter value and risk taking is obtained.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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