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Risk mitigating versus risk shifting : evidence from banks security trading in crises

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dc.contributor.author Peydró, José-Luis
dc.contributor.author Polo, Andrea, 1983-
dc.contributor.author Sette, Enrico
dc.contributor.author Vanasco, Victoria
dc.date.accessioned 2021-03-26T12:34:40Z
dc.date.available 2021-03-26T12:34:40Z
dc.date.issued 2023-02
dc.identifier.uri http://hdl.handle.net/10230/46965
dc.description.abstract We show that risk-mitigating incentives dominate risk-shifting incentives in fragile banks. We study security trading by banks, as banks can easily and quickly change their risk exposure within their security portfolio. For identification, we exploit different crisis shocks and supervisory ISIN-bank-month-level data. Less capitalized banks take relatively less risk after financial stress shocks. Results hold within identical regulatory capital risk weights categories. Moreover, additional tests suggest that banks’ own incentives, rather than supervision, are the main drivers. Results hold for the different crisis shocks since 2007/08, including the COVID-19 one. A model of bank behavior rationalizes our findings.
dc.format.mimetype application/pdf
dc.language.iso eng
dc.title Risk mitigating versus risk shifting : evidence from banks security trading in crises
dc.type info:eu-repo/semantics/workingPaper
dc.subject.keyword Risk shifting
dc.subject.keyword Financial crises
dc.subject.keyword Securities
dc.subject.keyword Bank capital
dc.subject.keyword Reach for yield
dc.subject.keyword Uncertainty
dc.subject.keyword Risk weights
dc.subject.keyword Supervision
dc.subject.keyword Franchise value
dc.subject.keyword COVID-19
dc.rights.accessRights info:eu-repo/semantics/openAccess


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