Loan growth and bank risk: new evidence

Juan Amador Torres (), Jose Gomez-Gonzalez and Andrés Pabón ()
Authors registered in the RePEc Author Service: Andrés Murcia

Financial Markets and Portfolio Management, 2013, vol. 27, issue 4, 365-379

Abstract: This study provides new evidence on the relationship between abnormal loan growth and banks’ risk-taking behavior using data from a rich panel of Colombian financial institutions. We show that abnormal credit growth during a prolonged period leads to an increase in banks’ riskiness, accompanied by a reduction in solvency and an increase in the ratio of nonperforming loans to total loans. We also show that abnormal credit growth played a fundamental role in the bank-failure process during the late 1990s financial crisis in Colombia. Our results have important implications for financial regulation and macro-prudential policy. Copyright Swiss Society for Financial Market Research 2013

Keywords: Abnormal loan growth; Hazard duration models; FGLS estimation; Emerging market economies; G20; G21 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (18)

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Related works:
Working Paper: Loans Growth and Banks’ Risk: New Evidence (2013)
Working Paper: Loans Growth and Banks´ Risk: New Evidence (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:kap:fmktpm:v:27:y:2013:i:4:p:365-379

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DOI: 10.1007/s11408-013-0217-6

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