The impact of contingent liability on commercial bank risk taking

• 成果类型: Article
• 署名作者: Esty, BC
• 署名单位: Harvard University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/S0304-405X(97)00043-3
• 发表日期: 1998
• 页码: 189-218
• 关键词: risk taking; Agency theory; banks; liability; Contingent claims

摘要

From 1863-1935, regulators imposed contingent liability on bank shareholders to discourage risk taking. Using data from 1900 to 1915, I find that banks subject to stricter liability rules have lower equity and asset volatility, hold a lower proportion of risky assets, and are less likely to increase their investment in risky assets when their net worth declines, consistent with the hypothesis that stricter liability discourages commercial bank risk taking. These findings provide lessons for current bank regulatory policy and show that the shape of the residual claimant's payoff function has a significant impact on managerial incentives and firm performance. (C) 1998 Elsevier Science S.A. All rights reserved.