Bank regulation, risk and return

evidence from the credit and sovereign debt crisis

Hafiz Hoque, Dimitris Andriosopoulos, Kostas Andriosopoulos, Raphael Douady

Research output: Contribution to journalArticle

22 Citations (Scopus)
197 Downloads (Pure)

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.
Original languageEnglish
Pages (from-to)455-474
Number of pages20
JournalJournal of Banking and Finance
Volume50
Early online date14 Jun 2014
DOIs
Publication statusPublished - 31 Jan 2015

Fingerprint

Private monitoring
Risk and return
Sovereign debt crises
Bank regulation
Credit
Survey data
Systemic risk
Supervision
Bank risk
Credit crisis
Moral hazard
Deposit insurance
World Bank
Systematic risk
Cross section
Idiosyncratic risk

Keywords

  • distance to default
  • systemic risk
  • idiosyncratic risk
  • beta
  • buy-and-hold returns
  • regulations

Cite this

Hoque, Hafiz ; Andriosopoulos, Dimitris ; Andriosopoulos, Kostas ; Douady, Raphael. / Bank regulation, risk and return : evidence from the credit and sovereign debt crisis. In: Journal of Banking and Finance. 2015 ; Vol. 50. pp. 455-474.
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Bank regulation, risk and return : evidence from the credit and sovereign debt crisis. / Hoque, Hafiz; Andriosopoulos, Dimitris; Andriosopoulos, Kostas; Douady, Raphael.

In: Journal of Banking and Finance, Vol. 50, 31.01.2015, p. 455-474.

Research output: Contribution to journalArticle

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