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The Dodd-Frank Act and Basel III: Market-based risk implications for global systemically important banks (G-SIBs)

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  • Mohanty, Sunil K.
  • Akhigbe, Aigbe
  • Basheikh, Abdulrahman
  • Khan, Haroon ur Rashid

Abstract

We examine the impact of the Dodd-Frank Act (DFA) and Basel III on market risk-taking behavior of global banks. Specifically, we measure the change in risk of global systemically important banks (G-SIBs) from the pre- global financial crisis (GFC) period to the post-European debt crisis period. Our results show a significant increase in each type of risk (total, market, and idiosyncratic) for G –SIBs from the pre-GFC period to the post-GFC period. While the risk of G-SIBs on average declined from the post-GFC period to the post-European debt crisis period, the risk level of G-SIBs on average, contrary to our expectations, is significantly higher during the post-European debt crisis period relative to the pre-GFC period. In addition, European global banks contributed significantly to the shift in risk from the pre-GFC period to the post- GFC period, as well as from the pre-GFC period to the post-European debt crisis period.

Suggested Citation

  • Mohanty, Sunil K. & Akhigbe, Aigbe & Basheikh, Abdulrahman & Khan, Haroon ur Rashid, 2018. "The Dodd-Frank Act and Basel III: Market-based risk implications for global systemically important banks (G-SIBs)," Journal of Multinational Financial Management, Elsevier, vol. 47, pages 91-109.
    • Handle: RePEc:eee:mulfin:v:47-48:y:2018:i::p:91-109
    DOI: 10.1016/j.mulfin.2018.10.002
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    Cited by:

    1. Baumöhl, Eduard & Bouri, Elie & Hoang, Thi-Hong-Van & Shahzad, Syed Jawad Hussain & Výrost, Tomáš, 2020. "Increasing systemic risk during the Covid-19 pandemic: A cross-quantilogram analysis of the banking sector," EconStor Preprints 222580, ZBW - Leibniz Information Centre for Economics.
    2. Baumöhl, Eduard & Bouri, Elie & Hoang, Thi-Hong-Van & Hussain Shahzad, Syed Jawad & Výrost, Tomáš, 2022. "Measuring systemic risk in the global banking sector: A cross-quantilogram network approach," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics.
    3. Baek, Seungho & Mohanty, Sunil K. & Glambosky, Mina, 2020. "COVID-19 and stock market volatility: An industry level analysis," Finance Research Letters, Elsevier, vol. 37(C).
    4. Pak, Olga, 2020. "Bank profitability in the Eurasian Economic Union: Do funding liquidity and systemic importance matter?," The North American Journal of Economics and Finance, Elsevier, vol. 54(C).

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    More about this item

    Keywords

    Dodd-Frank Act; Basel III; Bank risk; G-SIBs;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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