Abstract

http://ssrn.com/abstract=1785793
 
 

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Liberalization, Bank Governance, and Risk Taking


Manuel Illueca Muñoz


Universitat Jaume I

Lars Norden


Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM); Erasmus Research Institute of Management (ERIM)

Gregory F. Udell


Indiana University - Kelley School of Business - Department of Finance

November 16, 2011

EFA 2008 Athens Meetings Paper
AEA 2012 Chicago Meetings Paper

Abstract:     
We study the effects of the interplay between deregulation and governance on risk taking in the financial industry. We consider a large natural experiment in Spain where the removal of regulatory geographic constraints for savings banks led to a nationwide expansion of these banks during the past two decades. Based on a unique data set that combines information on the geographic distribution of bank lending, matched lender-borrower financial statements, and borrower defaults, we find that the governance of savings banks significantly affects the way in which they expand their lending activities. In particular, political influence at these banks is associated with higher ex ante risk taking and higher ex post loan defaults. Our study highlights the broader implications of the impact of global deregulation and consolidation and their interaction with governance issues.

Number of Pages in PDF File: 54

Keywords: Deregulation, Bank loans, Risk taking, Geographic expansion, Bank ownership

JEL Classification: G10, G21, G30, H11, L30

working papers series





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Date posted: March 15, 2011 ; Last revised: May 14, 2014

Suggested Citation

Illueca Muñoz, Manuel and Norden, Lars and Udell, Gregory F., Liberalization, Bank Governance, and Risk Taking (November 16, 2011). EFA 2008 Athens Meetings Paper . Available at SSRN: http://ssrn.com/abstract=1785793 or http://dx.doi.org/10.2139/ssrn.1785793

Contact Information

Manuel Illueca Muñoz (Contact Author)
Universitat Jaume I ( email )
Dep. Finance and Accounting
Campus del Riu Sec
Castellón de la Plana, E-12071
Spain
34964387135 (Phone)
Lars Norden
Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )
P.O. Box 1738
Room T08-21
3000 DR Rotterdam, 3000 DR
Netherlands
+31 10 408 2807 (Phone)
+31 10 408 9017 (Fax)
HOME PAGE: http://www.rsm.nl
Erasmus Research Institute of Management (ERIM) ( email )
P.O. Box 1738
3000 DR Rotterdam
Netherlands
Gregory F. Udell
Indiana University - Kelley School of Business - Department of Finance ( email )
1309 E. 10th St.
Bloomington, IN 47405
United States

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