Risk and the Corporate Structure of Banks
We identify different sources of risk as important determinants of banks' corporate structures when expanding into new markets. Subsidiary-based corporate structures benefit from greater protection against economic risk because of affiliate-level limited liability, but are more exposed to the risk of capital expropriation than are branches. Thus, branch-based structures are preferred to subsidiary-based structures when expropriation risk is high relative to economic risk, and vice versa. Greater cross-country risk correlation and more accurate pricing of risk by investors reduce the differences between the two structures. Furthermore, a bank's corporate structure affects its risk taking and affiliate size. Copyright (c) 2010 the American Finance Association.
Year of publication: |
2010
|
---|---|
Authors: | DELL'ARICCIA, GIOVANNI ; MARQUEZ, ROBERT |
Published in: |
Journal of Finance. - American Finance Association - AFA, ISSN 1540-6261. - Vol. 65.2010, 3, p. 1075-1096
|
Publisher: |
American Finance Association - AFA |
Saved in:
freely available
Saved in favorites
Similar items by person
-
Marquez, Robert, (2001)
-
Monetary Policy, Leverage, and Bank Risk-Taking
Dell'Ariccia, Giovanni, (2010)
-
Flight to Quality or to Captivity? : Information and Credit Allocation
Dell'Ariccia, Giovanni, (2001)
- More ...