U.S. bank holding companies (BHCs) have experienced dynamic changes over a period of 2000–2010. We find that the size distribution of sample banks becomes highly positively skewed with a small number of big banks becoming super-sized, and these big banks tend to take extra risk by holding derivative positions for trading purposes. The ten largest risk-taking banks hold about 70% of total assets of all the sample banks in 2010. We investigate whether the risk-taking activities of the BHCs translate into higher risk-adjusted return performance. In extensive panel regression analyses, we find that the risk-taking strategies of large banks by holding derivative positions for trading purpose do not show the clear evidence of enhancing risk-adjusted performance. We find that negative impacts of extra risk-taking on the risk-adjusted performance become bigger with the size of banks.
Kim, J. and Kim, Y.-C. (2013), "Super-size banks: Is risk-taking rewarding?", Global Banking, Financial Markets and Crises (International Finance Review, Vol. 14), Emerald Group Publishing Limited, pp. 115-140. https://doi.org/10.1108/S1569-3767(2013)0000014008Download as .RIS
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