Why are BHCs organized as parent-subsidiaries? How do they grow in value?

Elisa Luciano and Clas Wihlborg

Journal of Financial Stability, 2023, vol. 67, issue C

Abstract: We rationalize the organization of US banking groups into a holding company with subsidiaries – instead of branches or stand-alone units – subject to regulatory provisions of the ”source-of strength” type. We show that their value increases with debt diversity among affiliates and with complexity, as measured by the number of subsidiaries.

Keywords: US BHCs; Bank internal rescue; Leverage; Default costs; Bailouts; Ring fencing; Parent-subsidiaries; Branches; Banking complexity (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:67:y:2023:i:c:s1572308923000554

DOI: 10.1016/j.jfs.2023.101155

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