The Determinants of Operational Risk Losses

42 Pages Posted: 25 Jun 2019 Last revised: 25 Aug 2019

See all articles by Daniela Alifano

Daniela Alifano

Imperial College Business School

Valentina Corradi

University of Surrey - School of Economics

Walter Distaso

Imperial College Business School

Date Written: August 23, 2019

Abstract

In this paper, we investigate the association between international banks' operational losses and macro-financial variables, Governance Indicators and banks' specific covariates. We do so in a panel data setting, which includes both censoring (since losses below a given threshold are not reported) and attrition (since banks may not operate in a given Country over some fraction of the data temporal dimension), and allows for Country and bank specific fixed effects. We develop an asymptotic theory to estimate parameters of interest and their standard errors consistently, allowing us to conduct valid inference.

The results of our analysis uncover interesting links between macroeconomic and financial variables, Governance Indicators and banks' losses, whereas banks' specific variables seem to play a less prominent role.

Keywords: operational risk, panel data, incidental parameters, jackknife, censoring

JEL Classification: C33, C34, C55, C51, C52, G32, G21

Suggested Citation

Alifano, Daniela and Corradi, Valentina and Distaso, Walter, The Determinants of Operational Risk Losses (August 23, 2019). Available at SSRN: https://ssrn.com/abstract=3407863 or http://dx.doi.org/10.2139/ssrn.3407863

Daniela Alifano

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

Valentina Corradi

University of Surrey - School of Economics ( email )

Guildford
Guildford, Surrey GU2 5XH
United Kingdom

Walter Distaso (Contact Author)

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

Register to save articles to
your library

Register

Paper statistics

Downloads
27
Abstract Views
140
PlumX Metrics