Am I riskier if I rescue my banks? Beyond the effects of bailouts
We examine the relationship between bank bailouts and sovereign risk in 35 countries and 19 bailouts from 2005 to 2015. Bailouts negatively affect sovereign ratings, with rating agencies consistently perceiving higher risk when a country’s banking system has been rescued (risk-increasing effect). Th...
| Autores: | , , |
|---|---|
| Tipo de recurso: | artículo |
| Fecha de publicación: | 2021 |
| País: | España |
| Institución: | Universidad Autónoma de Madrid |
| Repositorio: | Biblos-e Archivo. Repositorio Institucional de la UAM |
| Idioma: | inglés |
| OAI Identifier: | oai:repositorio.uam.es:10486/721033 |
| Acceso en línea: | http://hdl.handle.net/10486/721033 https://dx.doi.org/10.1016/j.jfs.2021.100935 |
| Access Level: | acceso abierto |
| Palabra clave: | Bank bailouts Banking sector Public debt Sovereign ratings Sovereign risk Economía |
| id |
ES_ff3f1db8f0b2381576fcdca88f3a4aa7 |
|---|---|
| oai_identifier_str |
oai:repositorio.uam.es:10486/721033 |
| network_acronym_str |
ES |
| network_name_str |
España |
| repository_id_str |
|
| spelling |
Am I riskier if I rescue my banks? Beyond the effects of bailoutsCuadros-Solas, Pedro J.Salvador, CarlosSuárez Suárez, NuriaBank bailoutsBanking sectorPublic debtSovereign ratingsSovereign riskEconomíaWe examine the relationship between bank bailouts and sovereign risk in 35 countries and 19 bailouts from 2005 to 2015. Bailouts negatively affect sovereign ratings, with rating agencies consistently perceiving higher risk when a country’s banking system has been rescued (risk-increasing effect). The increase in public debt as a result of the bank bailouts is the main mechanism through which the risk-increasing effect occurs. Moreover, financial soundness and banking market structure shape the impact of bailouts on sovereign risk. In particular, proactiveness in undertaking public bailouts for banking systems that are largely distressed – that is, risky and low profitable – and highly concentrated seems to lead to smaller increases in sovereign risk. However, the strength of the connection between the public sector and the banking system neither moderates nor magnifies the impact of bailouts. Furthermore, rating dynamics (duration, momentum, and timing) reinforce the importance and duration of the effect of bailouts on sovereign ratings. The results are robust to endogeneity concerns, sample selection bias and several robustness testsFinancial support from the Spanish Ministry of Science, Innovation and University, Project PGC2018-099415-B-I00. Carlos Salvador acknowledges the financial support from Consellería d′Innovaci´ o, Universitats, Ci` encia i Societat Digital de la Generalitat Valenciana (AICO/2020/217). Nuria Su´ arez acknowledges financial support from the Spanish Ministry of Economy and Competitiveness, Projects ECO2017-85356-P and PID2020-118064GB-I00, and from the Professorship Excellence Program in accordance with the multi-year agreement signed by the Government of Madrid and the Autonoma University of Madrid (Line #3)ElsevierDepartamento de Financiación e Investigación ComercialFacultad de Ciencias Económicas y Empresariales20212021-08-26research articlehttp://purl.org/coar/resource_type/c_2df8fbb1AMhttp://purl.org/coar/version/c_ab4af688f83e57aainfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10486/721033https://dx.doi.org/10.1016/j.jfs.2021.100935reponame:Biblos-e Archivo. Repositorio Institucional de la UAMinstname:Universidad Autónoma de MadridInglésengopen accesshttp://purl.org/coar/access_right/c_abf2Attribution-NonCommercial-NoDerivatives 4.0 Internationalhttp://creativecommons.org/licenses/by-nc-nd/4.0/info:eu-repo/semantics/openAccessoai:repositorio.uam.es:10486/7210332026-06-23T12:46:27Z |
| dc.title.none.fl_str_mv |
Am I riskier if I rescue my banks? Beyond the effects of bailouts |
| title |
Am I riskier if I rescue my banks? Beyond the effects of bailouts |
| spellingShingle |
Am I riskier if I rescue my banks? Beyond the effects of bailouts Cuadros-Solas, Pedro J. Bank bailouts Banking sector Public debt Sovereign ratings Sovereign risk Economía |
| title_short |
Am I riskier if I rescue my banks? Beyond the effects of bailouts |
| title_full |
Am I riskier if I rescue my banks? Beyond the effects of bailouts |
| title_fullStr |
Am I riskier if I rescue my banks? Beyond the effects of bailouts |
| title_full_unstemmed |
Am I riskier if I rescue my banks? Beyond the effects of bailouts |
| title_sort |
Am I riskier if I rescue my banks? Beyond the effects of bailouts |
| dc.creator.none.fl_str_mv |
Cuadros-Solas, Pedro J. Salvador, Carlos Suárez Suárez, Nuria |
| author |
Cuadros-Solas, Pedro J. |
| author_facet |
Cuadros-Solas, Pedro J. Salvador, Carlos Suárez Suárez, Nuria |
| author_role |
author |
| author2 |
Salvador, Carlos Suárez Suárez, Nuria |
| author2_role |
author author |
| dc.contributor.none.fl_str_mv |
Departamento de Financiación e Investigación Comercial Facultad de Ciencias Económicas y Empresariales |
| dc.subject.none.fl_str_mv |
Bank bailouts Banking sector Public debt Sovereign ratings Sovereign risk Economía |
| topic |
Bank bailouts Banking sector Public debt Sovereign ratings Sovereign risk Economía |
| description |
We examine the relationship between bank bailouts and sovereign risk in 35 countries and 19 bailouts from 2005 to 2015. Bailouts negatively affect sovereign ratings, with rating agencies consistently perceiving higher risk when a country’s banking system has been rescued (risk-increasing effect). The increase in public debt as a result of the bank bailouts is the main mechanism through which the risk-increasing effect occurs. Moreover, financial soundness and banking market structure shape the impact of bailouts on sovereign risk. In particular, proactiveness in undertaking public bailouts for banking systems that are largely distressed – that is, risky and low profitable – and highly concentrated seems to lead to smaller increases in sovereign risk. However, the strength of the connection between the public sector and the banking system neither moderates nor magnifies the impact of bailouts. Furthermore, rating dynamics (duration, momentum, and timing) reinforce the importance and duration of the effect of bailouts on sovereign ratings. The results are robust to endogeneity concerns, sample selection bias and several robustness tests |
| publishDate |
2021 |
| dc.date.none.fl_str_mv |
2021 2021-08-26 |
| dc.type.none.fl_str_mv |
research article http://purl.org/coar/resource_type/c_2df8fbb1 AM http://purl.org/coar/version/c_ab4af688f83e57aa |
| dc.type.openaire.fl_str_mv |
info:eu-repo/semantics/article |
| format |
article |
| dc.identifier.none.fl_str_mv |
http://hdl.handle.net/10486/721033 https://dx.doi.org/10.1016/j.jfs.2021.100935 |
| url |
http://hdl.handle.net/10486/721033 https://dx.doi.org/10.1016/j.jfs.2021.100935 |
| dc.language.none.fl_str_mv |
Inglés eng |
| language_invalid_str_mv |
Inglés |
| language |
eng |
| dc.rights.none.fl_str_mv |
open access http://purl.org/coar/access_right/c_abf2 Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/ |
| dc.rights.openaire.fl_str_mv |
info:eu-repo/semantics/openAccess |
| rights_invalid_str_mv |
open access http://purl.org/coar/access_right/c_abf2 Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/ |
| eu_rights_str_mv |
openAccess |
| dc.format.none.fl_str_mv |
application/pdf |
| dc.publisher.none.fl_str_mv |
Elsevier |
| publisher.none.fl_str_mv |
Elsevier |
| dc.source.none.fl_str_mv |
reponame:Biblos-e Archivo. Repositorio Institucional de la UAM instname:Universidad Autónoma de Madrid |
| instname_str |
Universidad Autónoma de Madrid |
| reponame_str |
Biblos-e Archivo. Repositorio Institucional de la UAM |
| collection |
Biblos-e Archivo. Repositorio Institucional de la UAM |
| repository.name.fl_str_mv |
|
| repository.mail.fl_str_mv |
|
| _version_ |
1869425757456957440 |
| score |
15,811543 |