Journal Article

Bank Risk and Deposit Insurance

Luc Laeven

in The World Bank Economic Review

Published on behalf of World Bank

Volume 16, issue 1, pages 109-137
Published in print June 2002 | ISSN: 0258-6770
Published online June 2002 | e-ISSN: 1564-698X | DOI: http://dx.doi.org/10.1093/wber/16.1.109
Bank Risk and Deposit Insurance

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Arguing that a relatively high cost of deposit insurance indicates that a bank takes excessive risks, this article estimates the cost of deposit insurance for a large sample of banks in 14 economies to assess the relationship between the risk‐taking behavior of banks and their corporate governance structure. The results suggest that banks with concentrated ownership tend to take the greatest risks, and those with dispersed ownership engage in a relatively low level of risk taking. Moreover, as a proxy for bank risk, the cost of deposit insurance has some power in predicting bank distress.

Journal Article.  0 words. 

Subjects: Development Planning and Policy

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