Bank Risk and Deposit Insurance

By Luc Laeven. 2002

119 citations recorded by the source corpus.

Arguing that a relatively high cost of deposit insurance indicates that a bank takes excessive risks, this article estimates the cost of deposit insurance for a large sample of banks in 14 economies to assess the relationship between the risk-taking behavior of banks and their corporate governance structure. The results suggest that banks with concentrated ownership tend to take the greatest risks, and those with dispersed ownership engage in a relatively low level of risk taking. Moreover, as a proxy for bank risk, the cost of deposit insurance has some power in predicting bank distress

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/ef94f0522a554177594e1619a2a72aeaca58ee7d

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Citations in the corpus

Pricing of deposit insurance (2010, unknown): “Laeven (2002a) interprets the estimate of the opportunity-cost value of deposit insurance services as a proxy for bank risk and shows that this proxy has predictive power in forecasting bank distress.”
The impact of bank regulations, supervision, market structure, and bank characteristics on individual bank ratings: A cross-country analysis (2006, background): “Kane (2000), Cull et al. (2001), Demirguc-Kunt and Detragiache (2002), Demirguc-Kunt and Kane (2002), and Laeven (2002) conclude that a sound legal system with proper enforcement of rules reduces the adverse effects of deposit insurance on bank risk-taking.”
Estimating Systemic Risk in the International Financial System (2005, unknown): “Bongini, Laeven, and Majnoni (2002) use a Merton model to estimate East Asian bank failure probabilities during the Asian crisis and find that these estimates respond more quickly to changing financial conditions than ratings of credit risk agencies (but did not outperform measures using only balanc”
Does Deposit Insurance Improve Financial Intermediation? Evidence from the Russian Experiment (2011, background): “Laeven (2002) examines bank-level data from Bankscope and Datastream for 144 banks in seven emerging-market countries and seven developed countries over the period 1991- 98, and uses the cost of deposit insurance to examine the relation between governance structures and bank risk-taking.”
How Country and Safety-Net Characteristics Affect Bank Risk-Shifting (2002, unknown): “Laeven (2002b) investigates how country-specific and bank-specific features contribute to the value of insurance services.”
Cross-country determinants of bank income smoothing by managing loan loss provisions (2008, background): “Amongst recent empirical studies, only Laeven and Majnoni (2003) in an bank international sample and Pérez et al.”
Bank regulation and risk-taking incentives: An international comparison of bank risk (2005, methodology): “To control for deposit insurance we follow, among others, Cull et al. (2001) or Laeven (2002) , and define a dummy variable (INSEXP) with a value of 1 if the country has explicit deposit insurance and 0 otherwise.”
Ownership structure, market discipline, and banks risk-taking incentives under deposit insurance (2011, background): “I thus follow Marcus (1984) and Keeley (1990), and include Tobin’s q as a measure of charter value, which should negatively affect risk.”