Determinants of systematic risk in banks: A comparison of financial statement and other accounting data.

摘要

This thesis develops and empirically tests a model of the determinants of market-based systematic risk in banks. The level of systematic risk faced by bank equity holders depends on the riskiness of bank financial instrument portfolios. Thus, a linear model that relates levels of systematic risk to financial instrument positions (both long and short) is developed. Generally accepted accounting principles make a distinction between balance sheet financial instruments that must be recorded as assets and liabilities and off-balance sheet (OBS) financial instruments that must be disclosed in the footnotes to the annual report. The model explicitly incorporates these institutional details.; Ordinary least squares and a meta-analysis are used in the empirical portion of the dissertation. Market beta is used as the measure of systematic risk. Consistent with the hypotheses, systematic risk is related to both on and off-balance sheet financial instruments. In particular, beta is positively related to a bank's balance sheet assets and negatively related to its liability positions. The sign of the relation between systematic risk and OBS instruments is found to be positive (negative) for credit-enhancing (risk-transferring) OBS products.; Banks are subject to regulatory reporting and risk-based capital adequacy requirements. Banks risk-adjust their assets by assigning each financial instrument (on and off-balance sheet) to one of four risk categories. The relation between systematic risk and a bank's risk-adjusted assets is explored. Assets deemed riskiest by regulators are found to be positively associated with systematic risk, but otherwise the risk-based capital distinctions do not seem to help explain systematic risk.