Explore the vast range of titles available.

We construct a risk management index (RMI) to measure the strength and independence of the risk management function at bank holding companies (BHCs). The U.S. BHCs with higher RMI before the onset of the financial crisis have lower tail risk, lower nonperforming loans, and better operating and stock return performance during the financial crisis years. Over the period 1995 to 2010, BHCs with a higher lagged RMI have lower tail risk and higher return on assets, all else equal. Overall, these results suggest that a strong and independent risk management function can curtail tail risk exposures at banks.

This paper constructs a liquidity mismatch index (LMI) to gauge the mismatch between the market liquidity of assets and the funding liquidity of liabilities, for 2,882 bank holding companies over 2002 to 2014. The aggregate LMI decreases from +$4 trillion precrisis to −$6 trillion in 2008. We conduct an LMI stress test revealing the fragility of the banking system in early 2007. Moreover, LMI predicts a bank's stock market crash probability and borrowing decisions from the government during the financial crisis. The LMI is therefore informative about both individual bank liquidity and the liquidity risk of the entire banking system.

We propose a novel mechanism, \"financial dampening,\" whereby loan retrenchment by banks attenuates the effectiveness of monetary policy. The theory unifies an endogenous supply of illiquid local loans and risk sharing among subsidiaries of bank holding companies (BHCs). We derive an instrumental variable (IV) strategy that separates supply-driven loan retrenchment from local loan demand by exploiting linkages through BHC internal capital markets across spatially separate BHC member banks. We estimate that retrenching banks increase loan supply substantially less in response to exogenous monetary policy rate reductions. This relative decline has persistent effects on local employment and thus provides a rationale for slow recoveries from financial distress.

This paper assesses the impact of the geographic diversification of bank holding company (BHC) assets across the United States on their market valuations. Using two new identification strategies based on the dynamic process of interstate bank deregulation, we find that exogenous increases in geographic diversity reduced BHC valuations. We also find that the geographic diversification of BHC assets increased insider lending and reduced loan quality. Taken together, these findings are consistent with theories predicting that geographic diversity intensifies agency problems.

Financial expertise among independent directors of U.S. banks is positively associated with balance-sheet and market-based measures of risk in the run-up to the 2007–2008 financial crisis. While financial expertise is weakly associated with better performance before the crisis, it is strongly related to lower performance during the crisis. Overall, the results are consistent with independent directors with financial expertise supporting increased risk taking prior to the crisis. Despite being consistent with shareholder value maximization ex ante, these actions become detrimental during the crisis. These results are not driven by powerful chief executive officers who select independent financial experts to rubber stamp strategies that satisfy their risk appetite.

This study investigates the implications of cross-country differences in banking regulation and supervision for the international subsidiary locations and risk of U.S. bank holding companies (BHCs). We find that BHCs are more likely to operate subsidiaries in countries with weaker regulation and supervision and that such location decisions are associated with elevated BHC risk and higher contribution to systemic risk. The quality of BHCs' internal controls and risk management plays an important role in these location choices and risk outcomes. Overall, our study suggests that U.S. banking organizations engage in cross-country regulatory arbitrage, with potentially adverse consequences.

The objective of this study is to assess the operational efficiencies of Taiwanese commercial banks from 2013 to 2022, following the adoption of the International Financial Reporting Standards (IFRS) in 2013. This study introduces an extended non-convex two-system network data envelopment analysis (DEA) model, which decomposes the production process into two sub-processes: profitability and marketability stages. Additionally, the study categorizes eighteen listed commercial banks into two groups based on their affiliation with financial holding companies (FHCs). The results of the Mann-Whitney U test reveal significant differences in both profitability efficiency and marketability efficiency between FHC banks and non-FHC banks. However, the overall efficiency of FHC banks does not differ significantly from that of non-FHC banks during the sample period. The empirical findings indicate that, on average, banks affiliated with FHCs outperform those not affiliated with FHCs in terms of profitability efficiency, with this effect being statistically significant. Conversely, FHC banks exhibit lower marketability efficiency compared to non-FHC banks. These results suggest that while FHC affiliation can enhance profitability efficiency, it may not necessarily improve marketability efficiency.

Using supervisory data on operational losses from large U.S. bank holding companies (BHCs), we show that BHCs with socially responsible workforce policies suffer lower operational losses per dollar of total assets. The association significantly varies by the type of workforce policies and the type of operational losses. It is driven not only by small frequent losses but also by severe tail operational risk events. Further, the risk-reducing effects of the socially responsible workforce policies are stronger for larger BHCs with more employees. Our findings have important implications for banking organization performance, risk, and supervision.

We assess the association between geographic diversification and bank holding company (BHC) value and risk, controlling for the distance between the headquarters and branches. The distance-adjusted deposit dispersion index used as a measure of geographic diversification accounts for the number of locations where a BHC operates, the level of activity in each location, and the distance between a BHC and its branches. We find that geographic diversification is associated with BHC value enhancement and risk reduction, increased distance between a BHC and its branches is associated with firm value reduction and risk increase, and geographic diversification across more remote areas is associated with greater value enhancement but smaller risk reduction.

Motivated by the debate about the introduction of the fair value option for (financial) liabilities (FVOL) and the requirement to recognize and separately disclose in financial statements debt valuation adjustments (DVAs), this study explores what we can learn about a firm’s credit risk from DVAs. Using a sample of US bank holding companies that elect the FVOL, we show that DVAs generally cannot be explained by the same factors that explain contemporaneous changes in bank’s credit quality. We further find that DVAs can explain future changes in credit risk when the fair value of liabilities is based on managerial inputs (Level 3). Overall our results suggest that managers have an information advantage in estimating credit risk and that DVAs provide inside information to the market.