Loan Growth and Bank Risk: New Evidence

Publicado en

  • Financial Markets and Portfolio Management

Resumen

  • This study provides new evidence on the relationship between abnormal loan growth and banks’ risk-taking behavior using data from a rich panel of Colombian financial institutions. We show that abnormal credit growth during a prolonged period leads to an increase in banks’ riskiness, accompanied by a reduction in solvency and an increase in the ratio of nonperforming loans to total loans. We also show that abnormal credit growth played a fundamental role in the bank-failure process during the late 1990s financial crisis in Colombia. Our results have important implications for financial regulation and macro-prudential policy. Copyright Swiss Society for Financial Market Research 2013

fecha de publicación

  • 2013

Líneas de investigación

  • Abnormal Loan Growth
  • Emerging Market Economies
  • FGLS Estimation
  • Hazard Duration Models

Página inicial

  • 365

Última página

  • 379

Volumen

  • 27

Issue

  • 4