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A Cross-Country Assessment of Bank Risk-Shifting Behavior


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  • James R. Barth

    (Department of Finance, Auburn University, 303 Lowder Business Building, Auburn University, AL 36849, USA)

  • Mark Bertus

    (Department of Finance, Auburn University, 303 Lowder Business Building, Auburn University, AL 36849, USA)

  • Jiang Hai

    (Department of Finance, Jinan University, Guangzhou, 510632, China)

  • Triphon Phumiwasana

    (Milken Institute, 1250 Fourth St., Santa Monica, CA 90401, USA)

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    Banks are important for mobilizing savings and then channeling those funds to productive investment projects. While providing these and other services that contribute to economic growth and development, banks take on various types of risks with the expectation that the return they receive will compensate for the risks. This paper presents a simple model and tests the extent to which information asymmetry between bank owners and depositors induces risk-shifting behavior that allows for higher bank net interest margins. The empirical results support the hypothesis that the greater the degree of information asymmetry the higher net interest margins base upon a sample of 3,115 banks in 98 countries.

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    Bibliographic Info

    Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal Review of Pacific Basin Financial Markets and Policies.

    Volume (Year): 11 (2008)
    Issue (Month): 01 ()
    Pages: 1-34

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    Handle: RePEc:wsi:rpbfmp:v:11:y:2008:i:01:p:1-34

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    Related research

    Keywords: Banking; financial institutions; regulation and risk;

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