Competition, Risk-Shifting, and Public Bail-Out Policies (Gropp R., Hakenes H., Schnabel I.)

Competition and Market Power Risk-taking and Risk Management

Abstract This paper empirically investigates the effect of government bail-out policies on banks outside the safety net. We construct a measure of bail-out perceptions by using rating information. From there, we construct the market shares of insured competitor banks for any given bank, and analyze the impact of this variable on banks’ risk-taking behavior, using a large sample of banks from OECD countries. Our results suggest that government guarantees to some banks strongly increase the risk-taking of the competitor banks not protected by such guarantees. In contrast, there is no evidence that public guarantees increase the protected banks’ risk-taking. These results have important implications for the effects of the recent wave of bank bail-outs on banks’ risk-taking behavior.
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Libref/ Gropp R., Hakenes H., Schnabel I. (2009) “Competition, Risk-Shifting, and Public Bail-out Policies”, European Business School Research Paper No. 09-13, pp. 1-26
© Программирование — Александр Красильников, 2008
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