International Evidence on the Determinants of Banks’ Home Sovereign Bond Holdings

Forthcoming in Journal of Financial Services Research

32 Pages Posted: 4 Sep 2019

See all articles by Dimitris K. Chronopoulos

Dimitris K. Chronopoulos

University of St. Andrews - School of Management

George Dotsis

National Kapodistrian University of Athens - Faculty of Economics; Essex Finance Centre, Essex Business School, University of Essex

Nikolaos T. Milonas

National Kapodistrian University of Athens - Faculty of Economics; Cardiff University Business School

Date Written: August 28, 2019

Abstract

In this paper, we examine the determinants of domestic sovereign debt bank holdings with a panel dataset of 295 banks in 35 countries between 2002 and 2013. The findings indicate that the structure of bank ownership (domestic, foreign, or government ownership), the quality of governance, and the level of financial development of the countries in which banks operate all determine the level of home bias. Specifically, we find that domestic banks tend to hold more domestic sovereign debt relative to their foreign counterparts. We also provide evidence that home bias is even stronger when the domestic bank is controlled by its government. Moreover, home bias increases when government bonds are more risky, home governments are less effective, and when banking systems are less financially developed. Overall, we find that banks’ home bias in holding sovereign debt is an international phenomenon that is determined by both bank- and country-specific factors.

Keywords: Sovereign Debt, Home Bias, Moral Suasion, Government Ownership

JEL Classification: G11, G21

Suggested Citation

Chronopoulos, Dimitris K. and Dotsis, George and Milonas, Nikolaos T., International Evidence on the Determinants of Banks’ Home Sovereign Bond Holdings (August 28, 2019). Forthcoming in Journal of Financial Services Research, Available at SSRN: https://ssrn.com/abstract=3444056 or http://dx.doi.org/10.2139/ssrn.3444056

Dimitris K. Chronopoulos (Contact Author)

University of St. Andrews - School of Management ( email )

The Gateway
North Haugh
St. Andrews, Fife, Scotland KY16 9SS
United Kingdom

George Dotsis

National Kapodistrian University of Athens - Faculty of Economics ( email )

Greece

HOME PAGE: http://sites.google.com/site/gdotsis/

Essex Finance Centre, Essex Business School, University of Essex ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

Nikolaos T. Milonas

National Kapodistrian University of Athens - Faculty of Economics ( email )

8 Pesmazoglou street
GR-10559 Athens
Greece

Cardiff University Business School

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
13
Abstract Views
227
PlumX Metrics