Effect of External Support on Bank Default and Operating Risks: Does Country Strength Matter?. (4th September 2018)

• Record Type: Journal Article
• Authors: Shen, Chung‐Hua; Huang, Yu‐Li; Lin, Kun‐Li
• Is Part Of: Asia-Pacific journal of financial studies. Volume 47:Number 4(2018:Aug.)
• Page Start: 501
• Page End: 528
• Publication Date: 2018-09-04
• Subjects: Default risk -- Operating risk -- Individual rating -- Issuer rating -- Government ownership -- Foreign ownership; Pacific Area -- Economic conditions -- Periodicals; Finance -- Asia -- Periodicals; Finance -- Pacific Area -- Periodicals; Asia -- Economic conditions -- Periodicals; 332.09505
• DOI: 10.1111/ajfs.12222
• Languages: English
• ISSNs: 2041-9945

Abstract

Abstract: This study investigates how two forms of external support, namely, government and foreign ownership, affect bank default and operating risks. The results show, first, that government ownership reduces default risk and increases operating risk, while foreign ownership reduces both default and operating risks. Second, government ownership decreases default risk especially for banks from advanced countries and countries with better national governance. Third, foreign ownership from countries with better sovereign ratings decreases both default and operating risks. Our results suggest that Asian countries should increase income or national governance for more effective government support and open the domestic bank market.