The Coordination Role of Stress Tests in Bank Risk-Taking

• 成果类型: Article
• 署名作者: Corona, Carlos; Nan, Lin; Zhang, Gaoqing
• 署名单位: Carnegie Mellon University; Purdue University System; Purdue University; University of Minnesota System; University of Minnesota Twin Cities
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.12288
• 发表日期: 2019
• 页码: 1161-1200
• 关键词: social value; global games; equilibrium selection; INFORMATION; TRANSPARENCY; PRIVATE; MODEL

摘要

We examine whether stress tests distort banks' risk-taking decisions. We study a model in which a regulator may choose to rescue banks in the event of concurrent bank failures. Our analysis reveals a novel coordination role of stress tests. Disclosure of stress-test results informs banks of the failure likelihood of other banks, which can reduce welfare by facilitating banks' coordination in risk-taking. However, conducting stress tests also enables the regulator to more effectively intervene banks, coordinating them preemptively into taking lower risks. We find that, if the regulator has a strong incentive to bail out, stress tests improve welfare, whereas if the regulator's incentive to bail out is weak, stress tests impair welfare.