International diversification and risk of multinational banks: evidence from the pre-crisis period
Autor(a) principal: | |
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Data de Publicação: | 2014 |
Outros Autores: | , |
Tipo de documento: | Artigo |
Idioma: | eng |
Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
Texto Completo: | https://ciencia.iscte-iul.pt/public/pub/id/19403 http://hdl.handle.net/10071/9486 |
Resumo: | The recent financial crisis has clearly shown that the relationship between bank internationalization and risk is complex. Multinational banks can benefit from portfolio diversification, reducing their overall riskiness, but this effect can be offset by incentives going in the opposite direction, leading them to take on excessive risks. Since both effects are grounded on solid theoretical arguments, the answer of what is the actual relationship between bank internationalization and risk is left to the empirical analysis. In this paper, we study such relationship in the period leading to the financial crisis of 2007–2008. For a sample of 384 listed banks from 56 countries, we calculate two measures of risk for the period from 2001 to 2007 – the expected default frequency (EDF), a market-based and forward-looking indicator, and the Z-score, a balance-sheet-based and backward-looking measure – and relate them to the degree of banks’ internationalization. We find robust evidence that international diversification increases bank risk. |
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International diversification and risk of multinational banks: evidence from the pre-crisis periodBanksRiskMultinational bankingEconomic integrationMarket structureThe recent financial crisis has clearly shown that the relationship between bank internationalization and risk is complex. Multinational banks can benefit from portfolio diversification, reducing their overall riskiness, but this effect can be offset by incentives going in the opposite direction, leading them to take on excessive risks. Since both effects are grounded on solid theoretical arguments, the answer of what is the actual relationship between bank internationalization and risk is left to the empirical analysis. In this paper, we study such relationship in the period leading to the financial crisis of 2007–2008. For a sample of 384 listed banks from 56 countries, we calculate two measures of risk for the period from 2001 to 2007 – the expected default frequency (EDF), a market-based and forward-looking indicator, and the Z-score, a balance-sheet-based and backward-looking measure – and relate them to the degree of banks’ internationalization. We find robust evidence that international diversification increases bank risk.Elsevier2015-07-29T15:47:06Z2014-01-01T00:00:00Z20142015-07-29T15:45:13Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttps://ciencia.iscte-iul.pt/public/pub/id/19403http://hdl.handle.net/10071/9486eng1572-3089Gulamhussen, M.Pinheiro, C.Pozzolo, A.info:eu-repo/semantics/embargoedAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2024-07-07T02:56:12Zoai:repositorio.iscte-iul.pt:10071/9486Portal AgregadorONGhttps://www.rcaap.pt/oai/openairemluisa.alvim@gmail.comopendoar:71602024-07-07T02:56:12Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse |
dc.title.none.fl_str_mv |
International diversification and risk of multinational banks: evidence from the pre-crisis period |
title |
International diversification and risk of multinational banks: evidence from the pre-crisis period |
spellingShingle |
International diversification and risk of multinational banks: evidence from the pre-crisis period Gulamhussen, M. Banks Risk Multinational banking Economic integration Market structure |
title_short |
International diversification and risk of multinational banks: evidence from the pre-crisis period |
title_full |
International diversification and risk of multinational banks: evidence from the pre-crisis period |
title_fullStr |
International diversification and risk of multinational banks: evidence from the pre-crisis period |
title_full_unstemmed |
International diversification and risk of multinational banks: evidence from the pre-crisis period |
title_sort |
International diversification and risk of multinational banks: evidence from the pre-crisis period |
author |
Gulamhussen, M. |
author_facet |
Gulamhussen, M. Pinheiro, C. Pozzolo, A. |
author_role |
author |
author2 |
Pinheiro, C. Pozzolo, A. |
author2_role |
author author |
dc.contributor.author.fl_str_mv |
Gulamhussen, M. Pinheiro, C. Pozzolo, A. |
dc.subject.por.fl_str_mv |
Banks Risk Multinational banking Economic integration Market structure |
topic |
Banks Risk Multinational banking Economic integration Market structure |
description |
The recent financial crisis has clearly shown that the relationship between bank internationalization and risk is complex. Multinational banks can benefit from portfolio diversification, reducing their overall riskiness, but this effect can be offset by incentives going in the opposite direction, leading them to take on excessive risks. Since both effects are grounded on solid theoretical arguments, the answer of what is the actual relationship between bank internationalization and risk is left to the empirical analysis. In this paper, we study such relationship in the period leading to the financial crisis of 2007–2008. For a sample of 384 listed banks from 56 countries, we calculate two measures of risk for the period from 2001 to 2007 – the expected default frequency (EDF), a market-based and forward-looking indicator, and the Z-score, a balance-sheet-based and backward-looking measure – and relate them to the degree of banks’ internationalization. We find robust evidence that international diversification increases bank risk. |
publishDate |
2014 |
dc.date.none.fl_str_mv |
2014-01-01T00:00:00Z 2014 2015-07-29T15:47:06Z 2015-07-29T15:45:13Z |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/article |
format |
article |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
https://ciencia.iscte-iul.pt/public/pub/id/19403 http://hdl.handle.net/10071/9486 |
url |
https://ciencia.iscte-iul.pt/public/pub/id/19403 http://hdl.handle.net/10071/9486 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.relation.none.fl_str_mv |
1572-3089 |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/embargoedAccess |
eu_rights_str_mv |
embargoedAccess |
dc.format.none.fl_str_mv |
application/pdf |
dc.publisher.none.fl_str_mv |
Elsevier |
publisher.none.fl_str_mv |
Elsevier |
dc.source.none.fl_str_mv |
reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação instacron:RCAAP |
instname_str |
Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
instacron_str |
RCAAP |
institution |
RCAAP |
reponame_str |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
collection |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
repository.name.fl_str_mv |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
repository.mail.fl_str_mv |
mluisa.alvim@gmail.com |
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1817546355855327232 |