Bank risk in a decade of low interest rates View Full Text


Ontology type: schema:ScholarlyArticle     


Article Info

DATE

2017-07

AUTHORS

Yen-Ling Chang, Daniel A. Talley

ABSTRACT

A low interest rate regime remains in place in the U.S. after the Financial Crisis of 2008. Banks nevertheless need to find ways to boost the economic value to shareholders. This research examine whether it is possible for banks to stay the course and pursue profitable yet riskier assets or investments regardless of the fact that regulators have put restrictions on banks’ asset portfolio formation and capital ratio. This study hypothesizes that banks still engage in highly risky yet profitable investments or services to offset low interest income even after the 2008 Financial Crisis. A panel VAR model and a dynamic GMM model incorporating two structural breaks are employed to examine bank data obtained from the FFIEC from 2003 thru 2014. This study suggests that banks, especially larger banks, still have strong incentives to undertake riskier projects with higher expected returns in order to increase their performance. This has implications for policy makers examining risks inherent to the banking system. More... »

PAGES

505-528

References to SciGraph publications

  • 2013-08. Interaction effects in econometrics in EMPIRICAL ECONOMICS
  • 2006-12. New Evidence on the Determinants of Bank Risk in JOURNAL OF FINANCIAL SERVICES RESEARCH
  • Journal

    TITLE

    Journal of Economics and Finance

    ISSUE

    3

    VOLUME

    41

    Author Affiliations

    Identifiers

    URI

    http://scigraph.springernature.com/pub.10.1007/s12197-016-9367-5

    DOI

    http://dx.doi.org/10.1007/s12197-016-9367-5

    DIMENSIONS

    https://app.dimensions.ai/details/publication/pub.1010562336


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