Business complexity and risk management: Evidence from operational risk events in US bank holding companies

• 成果类型: Article
• 署名作者: Chernobai, Anna; Ozdagli, Ali; Wang, Jianlin
• 署名单位: Syracuse University; Federal Reserve System - USA; Federal Reserve Bank - Boston; University of California System; University of California Berkeley
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2020.02.004
• 发表日期: 2021
• 关键词: Operational risk; Bank holding companies; financial deregulation; Glass-Steagall Act; Business complexity

摘要

Recent regulatory proposals tie a financial institution's systemic importance to its complexity. However, little is known about how complexity affects banks' risk management. Using the 1996-1999 deregulations of U.S. banks' nonbanking activities as a natural experiment, we show that banks' business complexity increases their operational risk. This result is driven by banks that had been constrained by regulations, compared with other banks and also with nonbank financial institutions that were never subject to these regulations. We provide evidence that managerial failure underlying these events offsets benefits of strategic risk taking. (C) 2020 Elsevier B.V. All rights reserved.