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Incentives for effective risk management

Danielsson, Jon and Jorgensen, Bjorn N. and de Vries, Casper G. (2002) Incentives for effective risk management. Journal of Banking and Finance, 26 (7). pp. 1407-1425. ISSN 0378-4266

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Identification Number: 10.1016/S0378-4266(02)00269-8


Under the new Capital Accord, banks choose between two different types of risk management systems, the standard or the internal rating based approach. The paper considers how a bank's preference for a risk management system is affected by the presence of supervision by bank regulators. The model uses a principal–agent setting between a bank's owner and its risk management. The main conclusion is that previously unregulated institutions can be expected to switch to the lower quality standard approach subsequent to becoming regulated, i.e., the presence of regulation may induce a bank to decrease the quality of its risk management system.

Item Type: Article
Official URL:
Additional Information: © 2002 Elsevier Science B.V.
Subjects: H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management
Sets: Departments > Accounting
Departments > Finance
Research centres and groups > Financial Markets Group (FMG)
Date Deposited: 07 Aug 2013 14:13
Last Modified: 28 Aug 2013 08:47

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