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Bank Loan Portfolio and Bank Risk (in Korean)

Author

Listed:
  • Sang Wook Lee

    (Department of Business Administration, Seoul National University of Science and Technology)

  • Sung Wook Cho

    (Office of Bank Examination, The Bank of Korea)

Abstract

This paper examines the relationship between the bank loan concentration and bank risk by using 75 industry bank loan portfolio data. We defined the industry bank loan concentration proxy using HHI(Hirshimann-Herfindahl Index) based on the economic market concentration concept as well as RD(Relative Distance) considering the loan portfolio similarity among banks. We used the Bank-Z score, developed by Boyd and Runkle(1993), as the bank risk proxy. Empirical analyses in this paper show that bank loan portfolio concentration might increase bank insolvency risks, possibly by raising earning volatility.

Suggested Citation

  • Sang Wook Lee & Sung Wook Cho, 2015. "Bank Loan Portfolio and Bank Risk (in Korean)," Economic Analysis (Quarterly), Economic Research Institute, Bank of Korea, vol. 21(2), pages 28-62, June.
    • Handle: RePEc:bok:journl:v:21:y:2015:i:2:p:28-62
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    More about this item

    Keywords

    Bank loan; Bank risk; Loan portfolio;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services

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