The Impact of Managerial Style on Bank Credit Risk Responses to Systemic Crises: Examining Syndicated Bank Loan Portfolios

80 Pages Posted: 15 Jan 2018 Last revised: 6 Jan 2021

See all articles by Yu Shan

Yu Shan

Syracuse University - Whitman School of Management

Date Written: March 15, 2018

Abstract

When banks are confronted with systemic crises, some banks reduce the credit risk in their loan portfolios, whereas others exploit potential government bailouts and increase their internal credit risk in their loan portfolios. Using a connectedness sample method identifying managerial styles based on both asset and liability side positions, I find that asset innovators most aggressively reduce within-bank credit risk during financial crises, whereas liability innovators respond by increasing internal bank credit risk. In contrast, during non-crisis periods, the bank’s credit risk is positively related to its systemic risk exposure, indicating a baseline risk-taking proclivity. Results are robust to within-loan, GMM, and lead-lag analysis.

Keywords: Systemic Risk, Credit Risk, Public Guarantee, Syndicated Bank Loans, Manager Style, Risk-taking, Bank Governance

JEL Classification: G20, G21, G24, G28

Suggested Citation

Shan, Yu, The Impact of Managerial Style on Bank Credit Risk Responses to Systemic Crises: Examining Syndicated Bank Loan Portfolios (March 15, 2018). Baruch College Zicklin School of Business Research Paper No. 2018-03-02, Available at SSRN: https://ssrn.com/abstract=3101920 or http://dx.doi.org/10.2139/ssrn.3101920

Yu Shan (Contact Author)

Syracuse University - Whitman School of Management ( email )

721 University Avenue
Syracuse, NY 13244-2130
United States

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