Traditional theory suggests that higher bank profitability (or franchise value) dissuades bank risk-taking. We … highlight an opposite effect: higher profitability loosens bank borrowing constraints. This enables profitable banks to take … risk on a larger scale, inducing risk-taking. This effect is more pronounced when bank leverage constraints are looser, or …

This research aims to investigate whether the stress-testing exercises affect credit supply, banks' profitability and … and non-financial corporates, implying a decrease in banks' profitability. Results support the hypothesis that the … also an adverse impact on the real economy through a temporary decrease in credit supply and profitability. Results are …

After the financial crisis of 2007-2008, some bank performance dimensions have been the subject of debate, two of which … are bank efficiency and bank risk-taking behavior. The literature on bank efficiency and productivity has grown … considerably over the past three decades, and has gained momentum in the aftermath of the financial crisis. Interest in bank risk …

endogenous bank fragility and slow recovery from crises. When banks' investment decisions are not contractible, depositors form … expectations about bank risk-taking and demand a return on deposits according to their risk. This creates strategic … of bank net worth, leading to a persistent drop in investment and output. I bring the model to bear on the European …

Traditional theory suggests that high franchise value limits bank risk-taking incentives. Then why did many banks with … paper attempts to reconcile theory and evidence. We consider a setup where a bank takes risk by levering up, to invest in … risky market-based instruments. High franchise value allows the bank to borrow more, so it can take risk on a larger scale …

core business allows a bank to borrow more and take side risks on a larger scale, offsetting lower incentives to take risk … with cross-sectional patterns of bank risk-taking in the run up to the recent financial crisis …

This paper investigates whether there is any consistency between banks’ financial strength ratings (bank rating) and … they assume and thereby have a low probability of experiencing financial distress. Bank ratings, a measure of a bank …’s intrinsic safety and soundness, should therefore be able to capture the bank’s ability to manage financial distress while …

liability sides of a bank’s balance sheet. Fire sales of nonperforming loans are justified to address risk-taking failures and … long-term economic growth. Therefore, the central bank offers a liquidity guarantee when all market lenders back out so the … lending bank can hold nonperforming loans to negotiate fair value sales. However, the capital buffer has to service financing …

This paper investigates whether there is any consistency between banks' financial strength ratings (bank rating) and … they assume and thereby have a low probability of experiencing financial distress. Bank ratings, a measure of a bank …'s intrinsic safety and soundness, should therefore be able to capture the bank's ability to manage financial distress while …

profitability using random forest’s relative value importance measure. The results show that a bank’s profitability is largely … suggest that proxies for market power and size play significant roles in impacting both the bank’s profitability and its risk … determinants of a bank’s profitability in contrast to the absence of clear dominant determinants of a bank’s riskiness. …