A Cross-Country Assessment of Bank Risk-Shifting Behavior

James Barth, Mark Bertus (), Jiang Hai () and Triphon Phumiwasana ()
Additional contact information
Mark Bertus: Department of Finance, Auburn University, 303 Lowder Business Building, Auburn University, AL 36849, USA
Jiang Hai: Department of Finance, Jinan University, Guangzhou, 510632, China
Triphon Phumiwasana: Milken Institute, 1250 Fourth St., Santa Monica, CA 90401, USA

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2008, vol. 11, issue 01, 1-34

Abstract: Banks are important for mobilizing savings and then channeling those funds to productive investment projects. While providing these and other services that contribute to economic growth and development, banks take on various types of risks with the expectation that the return they receive will compensate for the risks. This paper presents a simple model and tests the extent to which information asymmetry between bank owners and depositors induces risk-shifting behavior that allows for higher bank net interest margins. The empirical results support the hypothesis that the greater the degree of information asymmetry the higher net interest margins base upon a sample of 3,115 banks in 98 countries.

Keywords: Banking; financial institutions; regulation and risk (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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DOI: 10.1142/S0219091508001234

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