Bank Systemic Risk around COVID-19: A Cross-Country Analysis
2020
Using 1,497 listed banks in 64 countries during the COVID-19 pandemic, we conduct the first broad-based international study that examines the effect of the pandemic on systemic risk from March through July 2020. Our study reveals positive effects of the growth rate of COVID-19 confirmed cases on systemic risk across countries, with larger banks and banks with higher loan-to-assets ratios contributing more strongly. The results are robust to alternative dependent and independent variables and subsample tests. However, this positive effect is mitigated by formal (e.g., government-owned banks) and informal (e.g., national culture and societal trust) rules.
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