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1. finance.business.uconn.edu › wp-content › uploadsBank Bailouts and Moral Hazard? Evidence from Banks ...

   finance.business.uconn.edu › wp-content › uploads

   The goal of this paper is to estimate a dynamic model of a bank to explain how bank bailouts exacerbate moral hazard. In the model, a bank makes an endogenous choice of the risks of its investments and can nance these investments by deposits and risky debt. I estimate nine model parameters that characterize a bank’s behavior. For the full sample

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2. www.econstor.eu › 10419/50000/1 › 667625526Bank bailouts, interventions, and moral hazard - EconStor

   www.econstor.eu › 10419/50000/1 › 667625526

   We analyze in this paper if safety nets in banking create moral hazard. Specifically, we answer the question if capital preservation measures induce additional risk-taking. To this end, we develop a simple game-theoretical model to describe the actions of regulatory institutions and banks.

   • File Size: 1MB
   • Author: Lammertjan Dam, Michael Koetter

   • Page Count: 68
   • Publish Year: 2011

3. www.academia.edu › 26185999 › Bank_bailouts_moral(PDF) Bank bailouts: moral hazard vs. value effect | Eduardo ...

   www.academia.edu › 26185999 › Bank_bailouts_moral

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   Do Bailouts Cause Moral Hazards or Franchise Value in Banking? This paper analyzes the impact of government bailout policies on the risk of the banking sector in OECD countries between 2005 and 2013. First, in line with the moral hazard hypothesis, we verify that financial institutions with high bailout expectations assume higher risks than others.

4. www.imf.org › external › pubsBank Bailouts: Moral Hazard vs. Value Effect - WP/99/106 - IMF

   www.imf.org › external › pubs

   Title: Bank Bailouts: Moral Hazard vs. Value Effect - WP/99/106 Created Date: 10/5/1999 8:16:36 PM

5. www.nber.org › working_papers › w15138BAILOUTS - National Bureau of Economic Research

   www.nber.org › working_papers › w15138

   First, banks choose to correlate their risk exposures. Second, private borrowers may deliberately choose to increase their interest-rate sensitivity following bad news about future needs for liquidity. Third, optimal monetary policy is time inconsistent. Fourth, there is a role for macro-prudential supervision.

   • Author: Emmanuel Farhi, Jean Tirole

   • Publish Year: 2012

6. www.semanticscholar.org › paper › Bank-Bailouts-and[PDF] Bank Bailouts and Moral Hazard? Evidence from Banks ...

   www.semanticscholar.org › paper › Bank-Bailouts-and

   Nov 1, 2016 · The simulation results show that a bank with a higher bailout belief takes more risks, especially when it is very close to bankruptcy. The goal of this paper is to estimate a dynamic model of a bank to explain how bank bailouts exacerbate moral hazard.

7. People also ask

   Is there a moral hazard difference between bailout and risk-taking?

   • Observations in both bailout and risk-taking equations are reduced, but obviously only slightly. The estimated moral hazard effect remains significantly positive and is somewhat larger. A first test for ownership differences refers to savings banks, which are owned by (regional) governments.

   Bank bailouts, interventions, and moral hazard

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   What are bailouts & risk?

   • 3.1 Bailouts and risk Bailouts are defined as a bank receiving a capital injection from the re- sponsible banking association’s insurance fund. The baseline specification is Equation (4), which measures risk taking with an indicator if the regulator deems the bank in distress. As noted before, distress is defined as a situation

   Bank bailouts, interventions, and moral hazard

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   Does a change of bailout expectations reduce moral hazard?

   • A change of bailout expectations by two standard deviations increases the probability of official distress from 6.2% to 9.9%. Only interventions directly tar- geting bank management and, to a lesser extent, penalties mitigate moral hazard. Weak interventions, such as warnings, do not reduce moral hazard.

   Bank bailouts, interventions, and moral hazard

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   How can we identify moral hazard in the German banking system?

   • To identify moral hazard in the German banking system, we cannot simply regress a bank’s risk-taking behavior on bailouts, because such a procedure suffers from endogeneity problems. Any bailed out bank is of course in some sort of distress. Thus, imposing some structure on the data is nec- essary to separate bad luck from bad behavior.

   Bank bailouts, interventions, and moral hazard

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   What is the marginal effect of risk on bailout expectations?

   • The marginal effect of risk with respect to bailout expectations is 7.2 basis points. A change of bailout expectations by two standard deviations increases the probability of official distress from 6.2% to 9.9%. Only interventions directly tar- geting bank management and, to a lesser extent, penalties mitigate moral hazard.

   Bank bailouts, interventions, and moral hazard

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   Do higher bailout probabilities affect risk taking?

   • Standard errors are clus- tered at the bank level, and we control for cross-sectional correlation by specifying time dummies, as suggested by Petersen (2009). –Table 4 around here – The main result in the first pair of columns, labeled Parsimonious, is the sig- nificantly positive effect of higher bailout probabilities on risk taking.

   Bank bailouts, interventions, and moral hazard

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8. www.chicagofed.org › bsc › dam-koetter-0506-pdfBank Bailouts, Interventions, and Moral Hazard

   www.chicagofed.org › bsc › dam-koetter-0506-pdf

   › Increase in bailout expectations has economicly significant impact on risk taking. › Interventions can help mitigate moral hazard, but only in the form of penalties or when directly addressing management. › Warnings and restrictions seem less effective.