Bank Herding and Systemic Risk

66 Pages Posted: 1 Jan 2020 Last revised: 1 Jun 2020

See all articles by Jin Cai

Jin Cai

University of South Carolina

Date Written: January 20, 2020

Abstract

This paper studies the relation between bank herding and financial system stability. I develop a set of bank-specific, time-varying measures of herding in asset, liability, and off-balance sheet (OBS) portfolios and empirically examine the relation between bank herding and systemic risk contribution. I find that for large banks, asset herding is associated with lower, liability herding is associated with higher, and OBS herding does not have a significant relation with systemic risk contribution. During crises, the relation of asset herding is stronger, the relation of liability herding is weaker, and the relation of OBS herding remains insignificant. I find that the “too-many-to-fail” effect contributes to the negative relation between bank herding and systemic risk contribution.

Keywords: bank herding, similarity, systemic risk, financial crises

JEL Classification: G18, G21, G28

Suggested Citation

Cai, Jin, Bank Herding and Systemic Risk (January 20, 2020). Available at SSRN: https://ssrn.com/abstract=3503952 or http://dx.doi.org/10.2139/ssrn.3503952

Jin Cai (Contact Author)

University of South Carolina ( email )

701 Main Street
Columbia, SC 29208
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
56
Abstract Views
406
rank
433,053
PlumX Metrics