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Banks’ size, scope and systemic risk: What role for conflicts of interest?
De Jonghe,O.G. Diepstraten,M. Schepens,G.
De Jonghe,O.G.
Diepstraten,M.
Schepens,G.
Abstract
We show that the effect of non-interest income on systemic risk exposures varies with bank size and a country’s institutional setting. Non-interest income reduces large banks’ systemic risk exposures, whereas it increases that of small banks. However, exploiting heterogeneity in countries’ institutional setting, we show that the bright side of innovation by large banks (lower systemic risk exposure for diversified banks) disappears in countries with more private and asymmetric information, more corruption and in concentrated banking markets. These empirical findings provide support for Saunders and Cornett (2014) who hypothesize which institutional features make the materialization of conflicts of interest more likely.
Description
Date
2015-12-31
Journal Title
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Volume Title
Publisher
Research Projects
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Journal Issue
Keywords
systemic risk, diversification, innovation, conflict of interest, global sample, G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages, G28 - Government Policy and Regulation, L51 - Economics of Regulation, SDG 16 - Peace, Justice and Strong Institutions
Citation
De Jonghe, O G, Diepstraten, M & Schepens, G 2015, 'Banks’ size, scope and systemic risk : What role for conflicts of interest? ', Journal of Banking & Finance, vol. 61 (Supplement 1), pp. S3-S13. https://doi.org/10.1016/j.jbankfin.2014.12.024