Journal of Banking & Finance Vol. 59 2015
Size, leverage, and risk-taking of financial institutions
Abstract
We investigate the link between firm size and risk-taking among financial institutions during the period of 2002 to 2012 and find size is positively correlated with risk-taking measures. Second, a decomposition of the primary risk measure, the Z-score, reveals that financial firms engage in excessive risk-taking mainly through increased leverage. Third, banks that enjoy better corporate governance engage in less risk-taking. Fourth, investment banks engage in more risk-taking compared to commercial banks. Finally, the positive relation between bank size and risk is present in the pre-crisis period (2002–2006) and the crisis period (2007–2009), but not in the post-crisis period (2010–2012).
- DOI
- 10.1016/j.jbankfin.2015.06.018
- Volume
- 59
- Pages
- 520-537
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib