Abstract

http://ssrn.com/abstract=1550361
 
 

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Stronger Risk Controls, Lower Risk: Evidence from U.S. Bank Holding Companies


Andrew Ellul


Indiana University - Kelley School of Business - Department of Finance

Vijay Yerramilli


University of Houston, C. T. Bauer College of Business

August 31, 2012

Journal of Finance, Forthcoming

Abstract:     
We construct a Risk Management Index (RMI) to measure the strength and independence of the risk management function at bank holding companies (BHCs). U.S. BHCs with higher RMI before the onset of the financial crisis have lower tail risk, lower non-performing loans, and better operating and stock return performance during the financial crisis years. Over the period 1995 to 2010, BHCs with a higher lagged RMI have lower tail risk and higher return on assets, all else equal. Overall, these results suggest that a strong and independent risk management function can curtail tail risk exposures at banks.

Number of Pages in PDF File: 70

Keywords: Risk Management, Tail Risk, Banks, Financial Crisis

JEL Classification: G21, G32

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Date posted: February 10, 2010 ; Last revised: May 12, 2014

Suggested Citation

Ellul, Andrew and Yerramilli, Vijay, Stronger Risk Controls, Lower Risk: Evidence from U.S. Bank Holding Companies (August 31, 2012). Journal of Finance, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1550361 or http://dx.doi.org/10.2139/ssrn.1550361

Contact Information

Andrew Ellul
Indiana University - Kelley School of Business - Department of Finance ( email )
1309 E. 10th St.
Bloomington, IN 47405
United States

Vijay Yerramilli (Contact Author)
University of Houston, C. T. Bauer College of Business ( email )
Houston, TX 77204
United States
713-743-2516 (Phone)
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