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

Ly, Kim Cuong; Liu, Frank Hong; Opong, Kwaku

doi:10.1016/j.jfs.2018.05.001

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

Ly, Kim Cuong; Liu, Frank Hong; Opong, Kwaku

Authors

KIM CUONG LY KIM.Ly@nottingham.ac.uk
Assistant Professor

Frank Hong Liu

Kwaku Opong

Abstract

© 2018 Elsevier B.V. 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.

Citation

Ly, K. C., Liu, F. H., & 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, 1-10. https://doi.org/10.1016/j.jfs.2018.05.001

Journal Article Type	Article
Acceptance Date	May 4, 2018
Online Publication Date	May 5, 2018
Publication Date	2018-08
Deposit Date	Nov 7, 2019
Publicly Available Date	Jan 15, 2020
Journal	Journal of Financial Stability
Print ISSN	1572-3089
Publisher	Elsevier
Peer Reviewed	Peer Reviewed
Volume	37
Pages	1-10
DOI	https://doi.org/10.1016/j.jfs.2018.05.001
Keywords	insolvency risk; complexity; internal capital market; stand-alone banks; bank holding companies’ affiliates
Public URL	https://nottingham-repository.worktribe.com/output/3075796
Publisher URL	https://www.sciencedirect.com/science/article/pii/S1572308917300281
Additional Information	This article is maintained by: Elsevier; Article Title: Can parents protect their children? Risk comparison analysis between affiliates of multi- and single-bank holding companies; Journal Title: Journal of Financial Stability; CrossRef DOI link to publisher maintained version: https://doi.org/10.1016/j.jfs.2018.05.001; Content Type: article; Copyright: © 2018 Elsevier B.V. All rights reserved.