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Institutional mechanisms, ownership and bank risk-taking during crises

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  • Anh Vo, Thi Thuy
  • Joseph, Nathan Lael

Abstract

Previous studies indicate that prior period investor protection, quality of government/institution and ownership have little to no influence on bank risk-taking around crisis periods. Using contemporaneous data for 40 countries, we show that institutional mechanisms, investor protection, bank regulation and supervision (BRS) rules, and ownership, reduced bank risk-taking around the Global Financial Crisis (GFC) and the Eurozone Crisis/Sovereign Debt Crisis periods. Institutional mechanisms have the strongest risk-reducing impacts on bank risk-taking, whereas foreign and government ownership have the weakest impacts. The greater the distance from bank default the lower the likelihood of crisis regimes. Investor protection increased (decreased) the likelihood of the GFC (Eurozone Crisis) regimes. Government ownership increased (decreased) the likelihood of the GFC (Eurozone Crisis) regimes. Using a generalized bivariate copula function, we untangle the relation between crisis regimes and bank risk-taking by showing that higher risk-taking increases the likelihood of crisis regimes.

Suggested Citation

  • Anh Vo, Thi Thuy & Joseph, Nathan Lael, 2025. "Institutional mechanisms, ownership and bank risk-taking during crises," The British Accounting Review, Elsevier, vol. 57(3).
    • Handle: RePEc:eee:bracre:v:57:y:2025:i:3:s0890838924002154
    DOI: 10.1016/j.bar.2024.101451
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    More about this item

    Keywords

    Bank risk-taking; Investor protection; Institutional mechanisms; Ultimate ownership; Bank regulation; Bivariate copula function; Crisis regimes;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • 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
    • 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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