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Complexity and bank risk during the financial crisis

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  • Krause, Thomas
  • Sondershaus, Talina
  • Tonzer, Lena

Abstract

We construct a novel dataset to measure banks’ complexity and relate it to banks’ riskiness. The sample covers stock listed Euro area banks from 2007 to 2014. Bank stability is significantly affected by complexity, whereas the direction of the effect differs across complexity measures.

Suggested Citation

  • Krause, Thomas & Sondershaus, Talina & Tonzer, Lena, 2017. "Complexity and bank risk during the financial crisis," Economics Letters, Elsevier, vol. 150(C), pages 118-121.
    • Handle: RePEc:eee:ecolet:v:150:y:2017:i:c:p:118-121
    DOI: 10.1016/j.econlet.2016.11.026
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    References listed on IDEAS

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    6. Huizinga, Harry & Laeven, Luc & Gong, Di, 2015. "Nonconsolidated subsidiaries, bank capitalization and risk taking," CEPR Discussion Papers 10992, C.E.P.R. Discussion Papers.
    7. Laeven, Luc & Ratnovski, Lev & Tong, Hui, 2016. "Bank size, capital, and systemic risk: Some international evidence," Journal of Banking & Finance, Elsevier, vol. 69(S1), pages 25-34.
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    Citations

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    Cited by:

    1. Beniamino Pisicoli, 2022. "Banking diversity, financial complexity and resilience to financial shocks: evidence from Italian provinces," International Review of Applied Economics, Taylor & Francis Journals, vol. 36(3), pages 338-402, May.
    2. Cardozo, Pamela & Morales-Acevedo, Paola & Murcia, Andrés & Rosado, Alejandra, 2022. "Does the geographical complexity of the Colombian financial conglomerates increase banks’ risk? The role of diversification, regulatory arbitrage, and funding costs," Journal of Banking & Finance, Elsevier, vol. 134(C).
    3. Abad, Jorge & D’Errico, Marco & Killeen, Neill & Luz, Vera & Peltonen, Tuomas & Portes, Richard & Urbano, Teresa, 2022. "Mapping exposures of EU banks to the global shadow banking system," Journal of Banking & Finance, Elsevier, vol. 134(C).
    4. Grodecka-Messi, Anna & Kenny, Seán & Ögren, Anders, 2021. "Predictors of bank distress: The 1907 crisis in Sweden," Explorations in Economic History, Elsevier, vol. 80(C).
    5. Wu, Ji & Guo, Mengmeng & Chen, Minghua & Jeon, Bang Nam, 2019. "Market power and risk-taking of banks: Some semiparametric evidence from emerging economies," Emerging Markets Review, Elsevier, vol. 41(C).
    6. Correa, Ricardo & Goldberg, Linda S., 2022. "Bank complexity, governance, and risk," Journal of Banking & Finance, Elsevier, vol. 134(C).
    7. Cao, Jin & Juelsrud, Ragnar E., 2022. "Opacity and risk-taking: Evidence from Norway," Journal of Banking & Finance, Elsevier, vol. 134(C).
    8. Martynova, Natalya & Vogel, Ursula, 2022. "Banks’ complexity-risk nexus and the role of regulation," Journal of Banking & Finance, Elsevier, vol. 134(C).
    9. Aldasoro, Iñaki & Hardy, Bryan & Jager, Maximilian, 2022. "The Janus face of bank geographic complexity," Journal of Banking & Finance, Elsevier, vol. 134(C).
    10. Jeon, Bang Nam & Wu, Ji & Chen, Limei & Chen, Minghua, 2020. "Diversification, efficiency and risk of banks: New consolidating evidence from emerging economies," School of Economics Working Paper Series 2020-10, LeBow College of Business, Drexel University.
    11. Argimón, Isabel & Rodríguez-Moreno, María, 2022. "Risk and control in complex banking groups," Journal of Banking & Finance, Elsevier, vol. 134(C).
    12. Isabel Argimón & María Rodríguez-Moreno, 2021. "Business complexity and geographic expansion in banking," Working Papers 2132, Banco de España.
    13. Claudia M. Buch & Linda S. Goldberg, 2021. "Complexity and Riskiness of Banking Organizations: Evidence from the International Banking Research Network," Staff Reports 966, Federal Reserve Bank of New York.
    14. Bakkar, Yassine & Nyola, Annick Pamen, 2021. "Internationalization, foreign complexity and systemic risk: Evidence from European banks," Journal of Financial Stability, Elsevier, vol. 55(C).
    15. Chen, Minghua & Kang, Qiaoling & Wu, Ji & Jeon, Bang Nam, 2022. "Do macroprudential policies affect bank efficiency? Evidence from emerging economies," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 77(C).
    16. Nyola, Annick Pamen & Sauviat, Alain & Tarazi, Amine & Danisman, Gamze Ozturk, 2021. "How organizational and geographic complexity influence performance: Evidence from European banks," Journal of Financial Stability, Elsevier, vol. 55(C).
    17. Florian Manz & Birgit Müller & Dirk Schiereck, 2020. "The pricing of European non-performing real estate loan portfolios: evidence on stock market evaluation of complex asset sales," Journal of Business Economics, Springer, vol. 90(7), pages 1087-1120, August.

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    More about this item

    Keywords

    Bank risk; Complexity; Globalization;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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