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The Corporate Complexity of Global Systemically Important Banks

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  • Carmassi, Jacopo

    (LUISS Guido Carli University)

  • Herring, Richard

    (University of PA)

Abstract

The financial crisis of 2007-2009 revealed that the corporate complexity of most of the Global Systemically Important Banks (G-SIBs) presented a formidable obstacle to any plausible orderly resolution of these institutions. This paper documents the extent of this complexity making use of an historical time series, developed by the authors, that shows the evolution of the number of majority-owned subsidiaries of G-SIBs over time. After a very significant increase in complexity before the crisis and until 2011, this trend may be reversing, possibly in response to regulatory and market pressures on banks since then. Nonetheless the reduction in complexity has been uneven across institutions and may not persist. The econo-metric analysis of this new set of panel data produces two key results with relevant policy implications: first, the relationship found in previous studies between the number of subsidiaries and bank size loses significance when time effects are introduced; second, large mergers and acquisitions are a key driver of complexity and their effect remains significant even when time effects are considered.

Suggested Citation

  • Carmassi, Jacopo & Herring, Richard, 2016. "The Corporate Complexity of Global Systemically Important Banks," Working Papers 16-09, University of Pennsylvania, Wharton School, Weiss Center.
  • Handle: RePEc:ecl:upafin:16-09
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    Cited by:

    1. Colleen Baker & Christine Cummings & Julapa Jagtiani, 2017. "The impacts of financial regulations: solvency and liquidity in the post-crisis period," Journal of Financial Regulation and Compliance, Emerald Group Publishing, vol. 25(3), pages 253-270, July.
    2. Franklin Allen & Itay Goldstein & Julapa Jagtiani & William W. Lang, 2016. "Enhancing Prudential Standards in Financial Regulations," Journal of Financial Services Research, Springer;Western Finance Association, vol. 49(2), pages 133-149, June.
    3. repec:eee:finsta:v:36:y:2018:i:c:p:187-207 is not listed on IDEAS
    4. Curi, Claudia & Murgia, Maurizio, 2018. "Divestitures and the financial conglomerate excess value," Journal of Financial Stability, Elsevier, vol. 36(C), pages 187-207.
    5. repec:gam:jjrfmx:v:12:y:2019:i:1:p:39-:d:211838 is not listed on IDEAS
    6. Silva, Walmir & Kimura, Herbert & Sobreiro, Vinicius Amorim, 2017. "An analysis of the literature on systemic financial risk: A survey," Journal of Financial Stability, Elsevier, vol. 28(C), pages 91-114.

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