Reputational Risk Measurement: Brazilian Banks
19 Pages Posted: 23 Jun 2016
Date Written: April 29, 2016
This paper investigates the reputational risk measurement in banking using a simple model that integrates random effects and Logit models. The pricing theory is outlined to include risk determinant factors as well as negative news for banks. The environment under which the quantitative model is applied corresponds to the perfect macroeconomic storm of Brazil that represents its weak oil prices, faint domestic economic activity and huge political problems. These aspects can increase risk in Brazilian banks, particularly by creating rumors that may trigger bank runs or other reputational problems. The results indicate that the large banks in the sample have the capacity to absorb the problems related to reputational risk with small variance and probability, in 2015. Besides that, one large investment bank suffered reputational problems.
Keywords: financial markets, asset pricing, risk management
JEL Classification: D53, G12, G32
Suggested Citation: Suggested Citation