Bank Risk-taking, Country Financial Capacity and Bank Bailouts in Crisis Periods

A Cross Country Analysis

Rafael Felipe Schiozer, Ramon S. Vilarins, Frederico A. Mourad

Research output: Contribution to conferencePaperResearchpeer-review

Abstract

This paper analyzes the impact of government bailout policies on the risk of the banking sector in OECD countries between 2005 and 2013. Consistent with previous literature, we verify that financial institutions with high bailout expectations assume higher risks than others do. We also find that, in normal times, rescue guarantees to large financial institutions distort competition in the sector and increase the risk of the unprotected institutions. Moreover, unprotected banks decrease their risk exposures faster than protected banks after the eruption of the 2007-2008 crisis, particularly in countries with deteriorated sovereign capacity to bailout banks. Taken together, these results indicate that a reduction in bailout probability decreases bank risk taking.
Original languageEnglish
Publication date2017
Number of pages29
Publication statusPublished - 2017
Event2017 Financial Management Association Annual Meeting - Boston, United States
Duration: 11 Oct 201714 Oct 2017
http://www.fma.org/boston

Conference

Conference2017 Financial Management Association Annual Meeting
CountryUnited States
CityBoston
Period11/10/201714/10/2017
Internet address

Keywords

  • Bank bailout
  • Bank risk taking
  • Bank competition
  • Financial crisis

Cite this

Schiozer, R. F., Vilarins, R. S., & Mourad, F. A. (2017). Bank Risk-taking, Country Financial Capacity and Bank Bailouts in Crisis Periods: A Cross Country Analysis . Paper presented at 2017 Financial Management Association Annual Meeting, Boston, United States.
Schiozer, Rafael Felipe ; Vilarins, Ramon S. ; Mourad, Frederico A. / Bank Risk-taking, Country Financial Capacity and Bank Bailouts in Crisis Periods : A Cross Country Analysis . Paper presented at 2017 Financial Management Association Annual Meeting, Boston, United States.29 p.
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abstract = "This paper analyzes the impact of government bailout policies on the risk of the banking sector in OECD countries between 2005 and 2013. Consistent with previous literature, we verify that financial institutions with high bailout expectations assume higher risks than others do. We also find that, in normal times, rescue guarantees to large financial institutions distort competition in the sector and increase the risk of the unprotected institutions. Moreover, unprotected banks decrease their risk exposures faster than protected banks after the eruption of the 2007-2008 crisis, particularly in countries with deteriorated sovereign capacity to bailout banks. Taken together, these results indicate that a reduction in bailout probability decreases bank risk taking.",
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Schiozer, RF, Vilarins, RS & Mourad, FA 2017, 'Bank Risk-taking, Country Financial Capacity and Bank Bailouts in Crisis Periods: A Cross Country Analysis ' Paper presented at, Boston, United States, 11/10/2017 - 14/10/2017, .

Bank Risk-taking, Country Financial Capacity and Bank Bailouts in Crisis Periods : A Cross Country Analysis . / Schiozer, Rafael Felipe; Vilarins, Ramon S.; Mourad, Frederico A.

2017. Paper presented at 2017 Financial Management Association Annual Meeting, Boston, United States.

Research output: Contribution to conferencePaperResearchpeer-review

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T1 - Bank Risk-taking, Country Financial Capacity and Bank Bailouts in Crisis Periods

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AU - Vilarins, Ramon S.

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N2 - This paper analyzes the impact of government bailout policies on the risk of the banking sector in OECD countries between 2005 and 2013. Consistent with previous literature, we verify that financial institutions with high bailout expectations assume higher risks than others do. We also find that, in normal times, rescue guarantees to large financial institutions distort competition in the sector and increase the risk of the unprotected institutions. Moreover, unprotected banks decrease their risk exposures faster than protected banks after the eruption of the 2007-2008 crisis, particularly in countries with deteriorated sovereign capacity to bailout banks. Taken together, these results indicate that a reduction in bailout probability decreases bank risk taking.

AB - This paper analyzes the impact of government bailout policies on the risk of the banking sector in OECD countries between 2005 and 2013. Consistent with previous literature, we verify that financial institutions with high bailout expectations assume higher risks than others do. We also find that, in normal times, rescue guarantees to large financial institutions distort competition in the sector and increase the risk of the unprotected institutions. Moreover, unprotected banks decrease their risk exposures faster than protected banks after the eruption of the 2007-2008 crisis, particularly in countries with deteriorated sovereign capacity to bailout banks. Taken together, these results indicate that a reduction in bailout probability decreases bank risk taking.

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KW - Bank competition

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Schiozer RF, Vilarins RS, Mourad FA. Bank Risk-taking, Country Financial Capacity and Bank Bailouts in Crisis Periods: A Cross Country Analysis . 2017. Paper presented at 2017 Financial Management Association Annual Meeting, Boston, United States.