Size, leverage, and risk-taking of financial institutions

Sanjai Bhagat, Brian Bolton and Jun Lu

Journal of Banking & Finance, 2015, vol. 59, issue C, 520-537

Abstract: We investigate the link between firm size and risk-taking among financial institutions during the period of 2002 to 2012 and find size is positively correlated with risk-taking measures. Second, a decomposition of the primary risk measure, the Z-score, reveals that financial firms engage in excessive risk-taking mainly through increased leverage. Third, banks that enjoy better corporate governance engage in less risk-taking. Fourth, investment banks engage in more risk-taking compared to commercial banks. Finally, the positive relation between bank size and risk is present in the pre-crisis period (2002–2006) and the crisis period (2007–2009), but not in the post-crisis period (2010–2012).

Keywords: Financial crises; Bank risk; Bank size; Bank leverage; Corporate governance (search for similar items in EconPapers)
JEL-codes: G01 G18 G21 G32 G38 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (85)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426615001867
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:59:y:2015:i:c:p:520-537

DOI: 10.1016/j.jbankfin.2015.06.018

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().