Risk and the Corporate Structure of Banks
Author | : International Monetary Fund |
Publisher | : International Monetary Fund |
Total Pages | : 27 |
Release | : 2010-02-01 |
ISBN-13 | : 9781451962901 |
ISBN-10 | : 1451962908 |
Rating | : 4/5 (08 Downloads) |
Download or read book Risk and the Corporate Structure of Banks written by International Monetary Fund and published by International Monetary Fund. This book was released on 2010-02-01 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.