Bailouts, franchise value and moral hazard in banking

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dc.contributor.author Kauko, Karlo
dc.date.accessioned 2019-01-11T10:47:42Z
dc.date.available 2019-01-11T10:47:42Z
dc.date.issued 2018
dc.identifier.uri https://helda.helsinki.fi/bof/handle/123456789/16017
dc.description.abstract Policy discussions are dominated by the view that governmental safety nets offered to banks cause moral hazard and encourage risk-taking. However, [Cordella, T and E Levy Yeyati (2003). Bank bailouts: moral hazard vs. value effect. Journal of Financial Intermediation, 12, 300–330.] proposed that government support offered during crises may increase bank franchise value, resulting in less risk-taking. This paper presents additional theoretical results on the franchise value effect. The franchise value effect can dominate over the moral hazard effect even when there are no specific crisis periods. The franchise value effect dominates if bank shareholders have a weak time preference and if the decision on the intensity of risk monitoring is a long-term choice.
dc.language.iso ENG
dc.publisher World Scientific
dc.subject pankkitoiminta
dc.subject.other moral hazard
dc.subject.other franchise value
dc.subject.other bailouts
dc.subject.other banking
dc.title Bailouts, franchise value and moral hazard in banking
dc.type Journal Article
dc.identifier.urn URN:NBN:fi:bof-201901111027
dc.subject.jel G01
dc.subject.jel G21
dc.subject.jel G28
dc.subject.jel H81
dc.series.name Singapore Economic Review
dc.series.volume 63
dc.series.number 3
dc.date.publication 15.6.2018
dc.subject.yso pankit
dc.subject.yso riskit
dc.type.okm A1
dc.relation.doi https://doi.org/10.1142/S0217590815501052
dc.format.pagerange 691-699

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