Charter value,risk-taking and systemic risk in banking before and after the global financial crisis of 2007-2008 |
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Authors: | Yassine Bakkar Clovis Rugemintwari Amine Tarazi |
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Institution: | 1. Université de Limoges, LAPE , Limoges, France;2. School of Business and Governance, Tallinn University of Technology , Tallinn, Estonia yassine.bakkar@unilim.fr;4. Université de Limoges, LAPE , Limoges, France;5. Institut Universitaire de France (IUF) , Paris, France https://orcid.org/0000-0001-8385-2994 |
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Abstract: | ABSTRACT We investigate how bank charter value affects risk for a sample of OECD banks by using standalone and systemic risk measures before, during, and after the global financial crisis of 2007–2008. Prior to the crisis, bank charter value is positively associated with risk-taking and systemic risk for very large ‘too-big-too-fail’ banks and large U.S. and European banks but such a relationship is inverted during and after the crisis. A deeper investigation shows that such a behaviour before the crisis is mostly relevant for very large banks and large banks with high growth strategies. Banks’ business models also influence this relationship. We find that for banks following a focus strategy, higher charter value amplifies both standalone and systemic risk for large U.S. and European banks. Our findings have important policy implications and cast doubts on the relevance of the uniform more stringent capital requirements introduced by Basel III. |
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Keywords: | Systemic risk standalone risk charter value global financial crisis bank regulation |
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