How does listing status affect bank risk? The effects of crisis, market discipline and regulatory pressure on listed and unlisted BHCs

Using a large panel of US bank holding companies (BHCs) from 2001 to 2015, we compare the risk-taking behavior of listed and unlisted banks, where there exist substantial differences in asymmetry information and agency problems. We document evidence of greater stability in listed banks versus their unlisted peers. However, listed banks became riskier than unlisted banks during the last crisis. These findings suggest the relationship between listing status and risk-taking is affected by outside factors. We find some evidence regulatory pressure was effective in limiting risk-taking by undercapitalized listed banks before, but not during the crisis. This casts doubt on the effectiveness of regulators during tumultuous times. We find large banks were exposed to less risk than small or medium-sized banks during the crisis. Debtholder discipline was ineffective in curbing the risk-taking behavior of banks. Our study indicates regulatory pressure is more effective at reducing risk than debtholder discipline, particularly for publicly listed banks.