Credit information sharing in the nexus between charter value and systemic risk in Asian banking

Toto Rusmanto, Wahyoe Soedarmono and Amine Tarazi

Research in International Business and Finance, 2020, vol. 53, issue C

Abstract: In this paper, we assess whether the link between charter value and systemic risk in banking is affected by credit information sharing at the country level. Using a sample of Asian listed banks, we document that banks with higher charter value exhibit lower systemic risk because these banks hold more capital. Nevertheless, we find that the self-disciplining role of charter value in banking is more pronounced for countries with lower depth of credit information sharing. Specifically, our findings also reveal that higher charter value alleviates systemic risk and increases capitalization, particularly in countries with lower quality of private credit bureaus. These findings suggest that higher charter value can be detrimental for financial stability due to an increase in bank systemic risk, particularly when private credit bureaus are of better quality. In order to overcome bank systemic risk, this paper advocates the importance of strengthening bank competition to limit charter value, in addition to promoting the development of private credit bureaus.

Keywords: Bank charter value; Systemic risk; Credit information sharing; Asia-Pacific (search for similar items in EconPapers)
JEL-codes: D82 G21 G28 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Credit information sharing in the nexus between charter value and systemic risk in Asian banking (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:53:y:2020:i:c:s0275531917306116

DOI: 10.1016/j.ribaf.2020.101199

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