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Bank connectedness and excessive risk-taking: Some cross-country evidence

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  • Wang, Peiwen
  • Chen, Minghua
  • Wu, Ji
  • Yan, Yuanyun

Abstract

We investigate whether the connectedness of banks shapes their incentive to take on excessive risk, using panel data from more than 400 public banks in 19 economies during the period of 2000–2018. We find supportive evidence that banks’ excessive risk-taking is significantly associated with their connectedness and the impact of banks’ directional connectedness varies. A higher outward connectedness significantly fuels banks’ incentive to take excessive risk, while a higher inward connectedness has a countervailing effect

Suggested Citation

  • Wang, Peiwen & Chen, Minghua & Wu, Ji & Yan, Yuanyun, 2024. "Bank connectedness and excessive risk-taking: Some cross-country evidence," Finance Research Letters, Elsevier, vol. 60(C).
    • Handle: RePEc:eee:finlet:v:60:y:2024:i:c:s154461232301293x
    DOI: 10.1016/j.frl.2023.104921
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    More about this item

    Keywords

    Bank connectedness; Excessive risk-taking; Cross-country evidence;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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