In this study, we investigate the tail dependency between bank stocks in China and 35 common risk factors. We measure univariate and multivariate conditional tail risk probabilities. The evidence indicates that tail events from risk factors in the banking, security trading, real estate, and...

We study two issues: the relationship between loan monitoring and loan risk and the corporate value of banks' investments in loan monitoring systems. We find that dynamic monitoring of loans, where the bank is scanning in real time for events that may be of relevance to loan quality, tend to...

Separating good and bad borrowers is a key role of banks. To do this, banks need monitoring systems and they need to monitor risky loans. We show that the investment in monitoring systems encourages risk taking, which leads to higher regulatory costs for the bank. This effect is so strong that...