Is bank default risk systematic?
Franco Fiordelisi and
David Marques-Ibanez ()
Journal of Banking & Finance, 2013, vol. 37, issue 6, 2000-2010
We evaluate the impact of commonly used indicators of bank distress on broad (i.e. sector and country) risks. This issue deserves special attention in the banking industry where there is a strong degree of interconnectedness among institutions and the default of a single bank may cause a cascading failure, which could potentially bankrupt the entire system. Using several measures of individual bank risk our results show that these measures have a direct impact on European banking (i.e. systemic) stock market risk. We also provide strong evidence suggesting that, for listed banks, default risk tends to be systematic (i.e. non-diversifiable).
Keywords: Systematic risk; Default risk; Banking (search for similar items in EconPapers)
JEL-codes: G12 G21 G32 (search for similar items in EconPapers)
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