Banking regulation and banks’ risk-taking behavior: The role of investors’ protection

Dutra, Tiago Mota; Teixeira, João C. A.; Dias, José Carlos

doi:10.1016/j.qref.2023.06.002

Cited by 5 publications

(1 citation statement)

References 78 publications

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“…As this change in behavior is reflected in the financial market information (Acharya et al, 2017), we measure banks' individual risk by using their asset risk, calculated by the standard deviation of asset returns, which reflects the yearly standard deviation based on the daily stock price returns multiplied by the total market value of a bank's equity over its market value. This variable, also used by Claessens et al (2014) and Dutra et al (2023), perfectly reflects banks' risk as it incorporates the two components of risk, namely idiosyncratic and market risk.…”

Section: Dependent Variablementioning

confidence: 99%

The contribution of macroprudential policies to banks' resilience: Lessons from the systemic crises and the COVID‐19 pandemic shock

2023

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This study examines the effectiveness of macroprudential policies in reducing the banks' risk during the COVID‐19 pandemic and compares these results with the systemic banking crises years. Based on a sample of 624 banks across 40 countries during the period 2006–2020, we find that loosening capital‐aimed macroprudential policies effectively reduced banks' risk during the COVID‐19 pandemic, while this behavior led to increased risk during the systemic crises years. In contrast, tightening the remaining macroprudential policies during the systemic crises years and during the pandemic proved effective in reducing banks' risk. Furthermore, we show that the magnitude of the impact of macroprudential policies was stronger during the systemic crisis than that during the pandemic. Finally, we show that the results are driven by the capital requirement prudential policy, both during the systemic crisis and the COVID‐19 pandemic, although the conservation buffer and the leverage limit also contributes to the ineffectiveness of these policies during the COVID‐19 pandemic. The banks' leverage and loan growth also play an enhancing role of the effects of the macroprudential policies.

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Section: Dependent Variablementioning

confidence: 99%

The contribution of macroprudential policies to banks' resilience: Lessons from the systemic crises and the COVID‐19 pandemic shock

2023

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The role of market discipline and macroprudential policies in achieving bank stability

Matos,

Teixeira,

Dutra

2024

Int. J Fin Econ

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This study examines whether forcing banks to hold subordinated debt and enforcing market discipline could enhance the effectiveness of capital macroprudential policies in reducing banks' risk and contribute to bank stability. Using the system generalised method of moments and based on a sample of 322 banks across 18 countries during the period 2006–2020, we find that a higher level of subordinated debt leads banks to avoid moral‐hazard behaviours and engage in risk shifting when adapting to a tighter macroprudential framework, which in turn leads to a greater effectiveness of these policies. Furthermore, as robustness tests, we show that this effect is stronger in advanced economies and in the United States of America. These results also stand using a different proxy for banks' risk.

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Macroprudential regulation and bank risk: The role of shareholders' and creditors' rights

Matos,

Teixeira,

Dutra

2024

Global Finance Journal

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Banking regulation and banks’ risk-taking behavior: The role of investors’ protection

Cited by 5 publications

References 78 publications

The contribution of macroprudential policies to banks' resilience: Lessons from the systemic crises and the COVID‐19 pandemic shock

The contribution of macroprudential policies to banks' resilience: Lessons from the systemic crises and the COVID‐19 pandemic shock

The role of market discipline and macroprudential policies in achieving bank stability

Macroprudential regulation and bank risk: The role of shareholders' and creditors' rights

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