How Country and Safety-Net Characteristics Affect Bank Risk-Shifting / Armen Hovakimian, Edward J. Kane, Luc Laeven.

Format:

Book

Author/Creator:

Hovakimian, Armen.

Contributor:

National Bureau of Economic Research.

Kane, Edward J.

Laeven, Luc.

Series:

Working Paper Series (National Bureau of Economic Research) no. w9322.

NBER working paper series no. w9322

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2002.

Summary:

Risk-shifting occurs when creditors or guarantors are exposed to loss without receiving adequate compensation. This paper seeks to measure and compare how well authorities in 56 countries controlled bank risk shifting during the 1990s. Although significant risk shifting occurs on average, substantial variation exists in the effectiveness of risk control across countries. We find that the tendency for explicit deposit insurance to exacerbate risk shifting is tempered by incorporating loss-control features such as risk-sensitive premiums, coverage limits, and coinsurance. Introducing explicit deposit insurance has had adverse effects in environments that are low in political and economic freedom and high in corruption.

Notes:

Print version record

November 2002.