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International expansion and riskiness of Banks

Faia, Ester, Ottaviano, Gianmarco I. P. and Sanchez Arjona, Irene (2017) International expansion and riskiness of Banks. CEP Discussion Papers (CEPDP1481). Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Abstract

We exploit an original dataset on European G-SIBs to assess how expansion in foreign markets affects their riskiness. We find a robust negative correlation between foreign expansion and bank risk (proxied by various individual and systemic risk metrics). Given individual bank riskiness, banks’expansion reduces the average riskiness of the banks’ pool (between effect). Moreover, foreign expansion of any given bank reduces its own risk (within effect). Diversification, competition and regulation channels are all important. Expansion in destination countries with different business cycle co-movement, stricter regulations and higher competition than the origin country decreases a bank’s riskiness.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/
Additional Information: © 2017 The Authors
Divisions: Economics
Centre for Economic Performance
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management
H Social Sciences > HG Finance
Sets: Departments > Economics
Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 21 Jul 2017 10:14
Last Modified: 21 Jul 2019 23:26
Funders: Economic and Social Research Council
URI: http://eprints.lse.ac.uk/id/eprint/83615

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