Bank regulation, risk and return : evidence from the credit and sovereign debt crisis

Hoque, Hafiz and Andriosopoulos, Dimitris and Andriosopoulos, Kostas and Douady, Raphael (2015) Bank regulation, risk and return : evidence from the credit and sovereign debt crisis. Journal of Banking and Finance, 50. pp. 455-474. ISSN 0378-4266 (https://doi.org/10.1016/j.jbankfin.2014.06.003)

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Abstract

In this paper, we analyze whether regulation reduced risk during the credit crisis and the sovereign debt crisis for a cross section of global banks. In this regard, we examine distance to default (Laeven and Levine, 2008), systemic risk (Acharya et al., 2010), idiosyncratic risk, and systematic risk. We employ World Bank survey data on regulations to test our conjectures. We find that regulatory restrictions, official supervisory power, capital stringency, along with private monitoring can explain bank risk in both crises. Additionally, we find that deposit insurance schemes enhance moral hazard, as this encouraged banks to take on more risk and perform poorly during the sovereign debt crisis. Finally, official supervision and private monitoring explains the returns during both crisis periods.

ORCID iDs

Hoque, Hafiz, Andriosopoulos, Dimitris ORCID logoORCID: https://orcid.org/0000-0003-3033-2308, Andriosopoulos, Kostas and Douady, Raphael;
  • Item type:Article
    ID code:48980
    Dates:
    Date
    Event
    31 January 2015
    Published
    14 June 2014
    Published Online
    4 June 2014
    Accepted
    Notes:NOTICE: This is the author's version of a work that was accepted for publication in Journal of Banking & Finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Banking & Finance, 2014, DOI: http://dx.doi.org/10.1016/j.jbankfin.2014.06.003
    Subjects:Social Sciences > Economic Theory
    Social Sciences > Finance
    Department:Strathclyde Business School > Accounting and Finance
    Depositing user: Pure Administrator
    Date deposited:24 Jul 2014 10:38
    Last modified:11 Nov 2024 10:43
    Related URLs:
    URI:https://strathprints.strath.ac.uk/id/eprint/48980
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