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The influence of regulatory and institutional framework and shareholder structure upon risk of financial institutions in Central Europe

Author

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  • Dorota Skała

    (Department of Finance, WNEiZ, University of Szczecin.)

Abstract

We study the effects of broadening the safety net on bank risk taking in Central Europe, using individual bank data and time-varying regulatory data. Further, we analyse the shareholder structure and its links with risk, as well as possible modifications it may introduce to the moral hazard incentives produced by the financial safety net. We find that more extensive deposit insurance schemes and state aid granted to the financial sector induce higher levels of risk in individual banks. The shareholder structure does not significantly influence the risk levels, although some evidence for higher risk of government-owned institutions is identified. Majority ownership in the form of other financial institutions not only does not alleviate the moral hazard, but makes it more acute, at least in some risk specifications.

Suggested Citation

  • Dorota Skała, 2013. "The influence of regulatory and institutional framework and shareholder structure upon risk of financial institutions in Central Europe," NBP Working Papers 149, Narodowy Bank Polski, Economic Research Department.
  • Handle: RePEc:nbp:nbpmis:149
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    File URL: http://www.nbp.pl/publikacje/materialy_i_studia/149_en.pdf
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    References listed on IDEAS

    as
    1. Laeven, Luc & Levine, Ross, 2009. "Bank governance, regulation and risk taking," Journal of Financial Economics, Elsevier, vol. 93(2), pages 259-275, August.
    2. repec:hrv:faseco:30747188 is not listed on IDEAS
    3. Nier, Erlend & Baumann, Ursel, 2006. "Market discipline, disclosure and moral hazard in banking," Journal of Financial Intermediation, Elsevier, vol. 15(3), pages 332-361, July.
    4. Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 2002. "Government Ownership of Banks," Journal of Finance, American Finance Association, vol. 57(1), pages 265-301, February.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Bank risk taking; moral hazard; transition economies;

    JEL classification:

    • 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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