The influence of regulatory and institutional framework and shareholder structure upon risk of financial institutions in Central Europe

Dorota Skała

No 149, NBP Working Papers from Narodowy Bank Polski

Abstract: We study the effects of broadening the safety net on bank risk taking in Central Europe, using individual bank data and time-varying regulatory data. Further, we analyse the shareholder structure and its links with risk, as well as possible modifications it may introduce to the moral hazard incentives produced by the financial safety net. We find that more extensive deposit insurance schemes and state aid granted to the financial sector induce higher levels of risk in individual banks. The shareholder structure does not significantly influence the risk levels, although some evidence for higher risk of government-owned institutions is identified. Majority ownership in the form of other financial institutions not only does not alleviate the moral hazard, but makes it more acute, at least in some risk specifications.

Keywords: Bank risk taking; moral hazard; transition economies (search for similar items in EconPapers)
JEL-codes: G21 G28 G32 (search for similar items in EconPapers)
Pages: 42
Date: 2013
New Economics Papers: this item is included in nep-ban, nep-eec, nep-rmg and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:nbp:nbpmis:149

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