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Abstract:![]()
CEP discussion paper
International expansion and riskiness of banks Irene Sanchez Arjona, Ester Faia and Gianmarco Ottaviano April 2017 Paper No' CEPDP1481: Full Paper ![]() We exploit an original dataset on European G-SIBs to assess how banks’ internationalization affects risk in the banking sector. We find a robust negative correlation between foreign expansion and banking risk as captured by various individual bank and systemic risk metrics. An IV strategy based on gravity regressions allows us to conclude that in our sample there is strong evidence that banks’ foreign expansion reduces risk, both from an individual bank and a systemic viewpoint. This reduction is associated with better asset diversification with no evidence of any relevant detrimental effect of possible regulatory arbitrage. |
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