
handle: 10419/96902 , 10419/96582
This paper analyzes the effect of the removal of government guarantees on bank risk taking. We exploit the removal of guarantees for German Landesbanken which results in lower credit ratings, higher funding costs, and a loss in franchise value. This removal was announced in 2001, but Landesbanken were allowed to issue guaranteed bonds until 2005. We find that Landesbanken lend to riskier borrowers after 2001. This effect is most pronounced for Landesbanken with the highest expected decrease in franchise value. Landesbanken also significantly increased their off-balance sheet exposure to the global ABCP market. Our results provide implications for the debate on how to remove guarantees.
G28, ddc:330, ddc:650, financial crisis, risk taking, loans, Government guarantees, exits, risk taking, franchise value, financial crisis, loans, franchise value, G20, G21, exits, government guarantees, government guarantees, exits, risk taking, franchise value, financial crisis, loans, Government guarantees, jel: jel:G20, jel: jel:G21, jel: jel:G28
G28, ddc:330, ddc:650, financial crisis, risk taking, loans, Government guarantees, exits, risk taking, franchise value, financial crisis, loans, franchise value, G20, G21, exits, government guarantees, government guarantees, exits, risk taking, franchise value, financial crisis, loans, Government guarantees, jel: jel:G20, jel: jel:G21, jel: jel:G28
| selected citations These citations are derived from selected sources. This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically). | 35 | |
| popularity This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network. | Top 10% | |
| influence This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically). | Top 10% | |
| impulse This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network. | Top 10% |
