Activity Strategies, Agency Problems and Bank Risk

40 Pages Posted: 5 Sep 2018

See all articles by Dung Tran

Dung Tran

Banking University Ho Chi Minh city; IPAG Business School

Isabelle Girerd-Potin

Université Grenoble Alpes

Pascal Louvet

University of Grenoble - Institut d'Administration des Entreprises Grenoble (IAE Grenoble)

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance

Date Written: August 27, 2018

Abstract

Our results show that US banks with a relatively high share of non-interest income become riskier with a moving toward non-interest-generating activities, especially activities from investment banking, proprietary trading, etc. The findings also prove, although weakly, that banks with a relatively low share of non-interest income enjoy the net gains from an increase of non-interest income activities. Interestingly, the data provides evidence of the bright side of diversification during crises. Our main findings are robust with a battery of robustness tests. The results are partially explained under agency frameworks related to poor corporate governance. Finally, the evidence has different implications for regulators, managers and investors.

Keywords: risk, diversification, noninterest income, banking, crises

JEL Classification: G21, G28, G34, G38

Suggested Citation

Tran, Dung and Girerd-Potin, Isabelle and Louvet, Pascal and Hassan, M. Kabir, Activity Strategies, Agency Problems and Bank Risk (August 27, 2018). Available at SSRN: https://ssrn.com/abstract=3239295 or http://dx.doi.org/10.2139/ssrn.3239295

Dung Tran (Contact Author)

Banking University Ho Chi Minh city ( email )

36 Ton That Dam
District 1
Ho Chi Minh
Vietnam

HOME PAGE: http://https://sites.google.com/buh.edu.vn/dungtran/

IPAG Business School ( email )

184 BD Saint Germain
Paris, 75006
France

Isabelle Girerd-Potin

Université Grenoble Alpes ( email )

Grenoble
France

Pascal Louvet

University of Grenoble - Institut d'Administration des Entreprises Grenoble (IAE Grenoble) ( email )

Grenoble
France

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States

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