increase prevails through a second channel: an increase in risk shifting. (3) Risk shifting decreases with the diversification …We present a model where bank assets are a portfolio of risky debt claims and analyze stockholders' risk … increases, risk shifting by borrowers increases, even if their leverage is unchanged (zombie lending). (2) While the literature …

profitability. In this study, we examine the impact of capital requirements on the cost of financial intermediation and bank … profitability using a panel dataset of 32 Bangladeshi banks over the period from 2000 to 2015. By employing a dynamic panel … of financial intermediation and increase bank profitability. The results hold when we use equity to total assets ratio as …

effect varies across banking crises, market crises, and normal times that occurred in the U.S. over the past quarter century … all times (during banking crises, market crises, and normal times). Second, capital enhances the performance of medium and … large banks primarily during banking crises. Additional tests explore channels through which capital generates the …

By exploiting basic common practice accounting and risk management rules, we propose a simple analytical dynamical … consequence of the introduction of a financial innovation that allow reducing the cost of portfolio diversification in a financial … mark-to-market and risk management rules. We provide a full analytical quantification of the multivariate feedback effects …

adverse selection and moral hazard problems leading to higher bank risk. The revenue diversification channel suggests that as …We show that bank risk rises, particularly for larger banks and those with greater interest-sensitive liabilities …, during times of economic policy uncertainty through two economic channels: ‘credit rationing’ and ‘revenue diversification …

The paper examines whether bank diversification in multiple dimensions can protect bank lending from uncertainty shocks … banking by the dispersion of bank-level shocks. Our results confirm that banks may reduce loan growth and experience more … credit risk amid greater uncertainty. These adverse impacts of uncertainty on bank lending (both quantity and quality) are …

-offs and write-downs, we examine the impact of loan portfolio sector concentration on credit risk. By controlling for common … risk factors, we separate the bank-specific selection and monitoring abilities from the composition of the loan portfolio …

The paper focuses on the interaction between the solvency probability of a banking firm and the diversification … risk (VaR) into the firm-theoretical model of a banking firm facing the risk of asset return. Given the necessity to … achieve a confidence level for solvency, we demonstrate that diversification reduces the amount of equity. Notably, the VaR …

Does competition improve bank insolvency risk through a revenue diversification channel and what are the drivers that … underlie diversification? Using a panel dataset of 978 banks, H-statistic and the Lerner index as measures of the degree of … competition in the banking sector, and employing three stage least squares (3sls) estimation techniques, we empirically …