Can parents protect their children? Risk comparison analysis between affiliates of multi- and single-bank holding companies

Ly, K. C., Liu, F. H. and Opong, K. (2018) Can parents protect their children? Risk comparison analysis between affiliates of multi- and single-bank holding companies. Journal of Financial Stability, 37, pp. 1-10. (doi: 10.1016/j.jfs.2018.05.001)

Abstract

We find that multi-bank holding companies (MBHCs) in the U.S. have lower insolvency risk than single-bank holding companies (SBHCs) at the parent level, but have significantly higher insolvency risk than the latter at the subsidiary level. Our results suggest that MBHC parents tend to benefit from the internal capital market while allowing for more risk-taking at the individual levels. We further find that the higher risk for MBHC affiliates is because of the organizational and geographic complexity at the MBHC parent level. Our results highlight the importance of government regulation on banks at both parent and subsidiary levels.

• Item Type: Articles
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Liu, Professor Frank and Opong, Professor Kwaku
• Authors: Ly, K. C., Liu, F. H., and Opong, K.
• College/School: College of Social Sciences > Adam Smith Business School > Accounting and Finance
• Journal Name: Journal of Financial Stability
• Publisher: Elsevier
• ISSN: 1572-3089
• ISSN (Online): 1878-0962
• Published Online: 05 May 2018
• Copyright Holders: Copyright © 2018 Elsevier B.V.
• First Published: First published in Journal of Financial Stability 37: 1-10
• Publisher Policy: Reproduced in accordance with the copyright policy of the publisher