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The role of bank funding in systematic risk transmission

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  • Muijsson, Cherry
  • Satchell, Stephen

Abstract

The transmission of risk among financial institutions is not limited to systematic risk and interest rate factors, but is also affected by the interconnectedness of institutions through balance sheet exposures. It is recognized that univariate specifications have severe limitations in explaining banks observed performance and measurement of risk, and may obscure possible unintended effects of bank capital regulation. Consequently, we link systematic risk to balance sheet factors and allow for dependencies in the covariance structure. We find that funding structure and balance sheet factors asymmetrically affect observed systematic risk in the largest Australian banks.

Suggested Citation

  • Muijsson, Cherry & Satchell, Stephen, 2020. "The role of bank funding in systematic risk transmission," Finance Research Letters, Elsevier, vol. 33(C).
    • Handle: RePEc:eee:finlet:v:33:y:2020:i:c:s1544612319300157
    DOI: 10.1016/j.frl.2019.06.020
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    References listed on IDEAS

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    Cited by:

    1. Nguyen, Thi Anh Nhu, 2022. "The role of institutional quality in bank deposit growth In European transition economies," Finance Research Letters, Elsevier, vol. 47(PA).

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