Calendrier du 21 juin 2023
Economic History Seminar
Du 21/06/2023 de 12:00 à 13:30
R1-09
MITCHENER Kris ((Leavey School of Business))
How do Financial Crises Redistribute Risk?
écrit avec Kris J. Mitchener, Angela Vossmeyer
We examine how financial crises redistribute risk, employing novel empirical methods and micro
data from the largest financial crisis of the 20th century – the Great Depression. Using
balance-sheet and systemic risk measures at the bank level, we build an econometric model
with incidental truncation that jointly considers bank survival, the type of bank closure (consolidations,
absorption, and failures), and changes to bank risk. Despite roughly 9,000 bank
closures, risk did not leave the financial system; instead, it increased. We show that risk was
redistributed to banks that were healthier prior to the financial crisis. A key mechanism driving
the redistribution of risk was bank acquisition. Each acquisition increases the balance-sheet
and systemic risk of the acquiring bank by 25%. Our findings suggest that financial crises do
not quickly purge risk from the system, and that merger policies commonly used to deal with
troubled financial institutions during crises have important implications for systemic risk