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Is bank default risk systematic?

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Author Info

  • Fiordelisi, Franco
  • Marqués-Ibañez, David

Abstract

We evaluate the impact of commonly used indicators of bank distress on broad (i.e. sector and country) risks. This issue deserves special attention in the banking industry where there is a strong degree of interconnectedness among institutions and the default of a single bank may cause a cascading failure, which could potentially bankrupt the entire system. Using several measures of individual bank risk our results show that these measures have a direct impact on European banking (i.e. systemic) stock market risk. We also provide strong evidence suggesting that, for listed banks, default risk tends to be systematic (i.e. non-diversifiable).

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 37 (2013)
Issue (Month): 6 ()
Pages: 2000-2010

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Handle: RePEc:eee:jbfina:v:37:y:2013:i:6:p:2000-2010

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Web page: http://www.elsevier.com/locate/jbf

Related research

Keywords: Systematic risk; Default risk; Banking;

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References

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Cited by:
  1. Apergis, Nicholas, 2014. "The long-term role of non-traditional banking in profitability and risk profiles: Evidence from a panel of U.S. banking institutions," Journal of International Money and Finance, Elsevier, vol. 45(C), pages 61-73.
  2. Fiordelisi, Franco & Meles, Antonio & Monferrà, Stefano & Starita, Maria Grazia, 2013. "Personal vs. Corporate Goals: Why do Insurance Companies Manage Loss Reserves?," MPRA Paper 47867, University Library of Munich, Germany.
  3. Leonardo Gambacorta & Adrian Van Rixtel, 2013. "Structural bank regulation initiatives: approaches and implications," BIS Working Papers 412, Bank for International Settlements.
  4. Chen, Jie & Hill, Paula, 2013. "The impact of diverse measures of default risk on UK stock returns," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5118-5131.

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