TY  - JOUR
AU  - Hovakimian,Armen
AU  - Kane,Edward J.
AU  - Laeven,Luc
TI  - How Country and Safety-Net Characteristics Affect Bank Risk-Shifting
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9322
PY  - 2002
Y2  - November 2002
UR  - http://www.nber.org/papers/w9322
L1  - http://www.nber.org/papers/w9322.pdf
N1  - Author contact info:
Armen Hovakimian
Department of  Economics and Finance
Baruch College Zicklin School of Business
1 Bernard Baruch Way
New York, NY 10010
Tel: 646-312-3490
Fax: 646-312-3451
E-Mail: Armen_Hovakimian@baruch.cuny.edu

Edward J. Kane
2325 E Calle Los Altos
Tucson, AZ 85718
Tel: 520-299-5066
E-Mail: edward.kane@bc.edu

Luc Laeven
Senior Economist
International Monetary Fund
700 19th Avenue, NW
Washington, DC 20431
Tel: 202/623-9020
Fax: 202/623-4740
E-Mail: Llaeven@imf.org
AB  - Risk-shifting occurs when creditors or guarantors are exposed to loss without receiving adequate compensation. This paper seeks to measure and compare how well authorities in 56 countries controlled bank risk shifting during the 1990s. Although significant risk shifting occurs on average, substantial variation exists in the effectiveness of risk control across countries. We find that the tendency for explicit deposit insurance to exacerbate risk shifting is tempered by incorporating loss-control features such as risk-sensitive premiums, coverage limits, and coinsurance. Introducing explicit deposit insurance has had adverse effects in environments that are low in political and economic freedom and high in corruption.
ER  -