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The ‘risk dividend’ in banks’ internal capital markets


  • Yener Altunbaş

    () (Bangor University)

  • John Thornton

    () (Office of Technical Assistance, US Department of the Treasury
    Bangor University)

  • Tianshu Zhao

    () (Birmingham Business School, University of Birmingham)


We examine the impact of banks’ internal capital markets (ICMs) before the 2008-09 financial crisis on bank risk-taking during the crisis in a panel of 8,068 banks across 16 countries. The size of ICMs was an important driver of risk during the crisis when banks with larger ICMs exhibited lower risk levels. Larger ICMs reduced risk further for well capitalized banks. Banks more likely to be in trouble in a crisis are likely to have smaller ICMs, be larger in size, less well capitalized, less efficient, less profitable, and more dependent on market funding.

Suggested Citation

  • Yener Altunbaş & John Thornton & Tianshu Zhao, 2019. "The ‘risk dividend’ in banks’ internal capital markets," Working Papers 19004, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
  • Handle: RePEc:bng:wpaper:19004

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    More about this item


    Banks; governance; risk; CEO power; boards of directors; institutional investors;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • 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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