Risk and the Corporate Structure of Banks
Electronic Access:
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Summary:
We identify different sources of risk as important determinants of banks' corporate structures when expanding into new markets. Subsidiary-based corporate structures benefit from greater protection against economic risk because of affiliate-level limited liability, but are more exposed to the risk of capital expropriation than are branches. Thus, branch-based structures are preferred to subsidiary-based structures when expropriation risk is high relative to economic risk, and vice versa. Greater cross-country risk correlation and more accurate pricing of risk by investors reduce the differences between the two structures. Furthermore, the corporate structure affects bank risk taking and affiliate size.
Series:
Working Paper No. 2010/040
Subject:
Bank credit Banking Credit risk Financial institutions Financial regulation and supervision Foreign banks Loans Money Organizational structure of revenue administration Revenue administration
English
Publication Date:
February 1, 2010
ISBN/ISSN:
9781451962901/1018-5941
Stock No:
WPIEA2010040
Pages:
26
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