Cross-Border Bank Flows and Systemic Risk

82 Pages Posted: 23 Mar 2017 Last revised: 30 Apr 2018

George Andrew Karolyi

Cornell University - Samuel Curtis Johnson Graduate School of Management

John Sedunov

Villanova University - Department of Finance

Alvaro G. Taboada

Mississippi State University

Date Written: April 23, 2018

Abstract

Using Bank for International Settlements (BIS) data on cross-border bank flows across 128 countries and over two decades, we find that heightened bank flows are associated with improved financial stability in a recipient country’s bank system. The reductions in marginal expected shortfall (MES) are concentrated among network-central banks and especially those in less concentrated banking sectors. Higher bank flows are also associated with improvements in bank asset quality, efficiency, and profitability in recipient markets. We interpret these new findings as consistent with predictions from recent models of bank globalization that emphasize a competition channel for bank risk-taking.

Keywords: Cross-border bank flows, financial institutions, bank regulation, systemic risk, financial crises

JEL Classification: G21, G28, G34, G38

Suggested Citation

Karolyi, George Andrew and Sedunov, John and Taboada, Alvaro G., Cross-Border Bank Flows and Systemic Risk (April 23, 2018). Available at SSRN: https://ssrn.com/abstract=2938544 or http://dx.doi.org/10.2139/ssrn.2938544

George Andrew Karolyi

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States

John Sedunov (Contact Author)

Villanova University - Department of Finance ( email )

800 Lancaster Ave.
Villanova, PA 19085
United States
610-519-4374 (Phone)

HOME PAGE: http://homepage.villanova.edu/john.sedunov/

Alvaro G. Taboada

Mississippi State University ( email )

Mississippi State, MS 39762
United States
662-325-6716 (Phone)
662-325-1977 (Fax)

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