We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
Do Financial Regulations Shape the Functioning of Financial Institutions' Risk Management in Asset-Backed Securities Investment?
- Authors
Chen, Xuanjuan; Higgins, Eric; Xia, Han; Zou, Hong
- Abstract
We show that installing stronger risk management into financial institutions—a proposal widely discussed following the 2008 financial crisis—is insufficient to constrain institutions' exposure to investment with lurking risk, such as asset-backed securities (ABS). Regulations affect the functioning of risk management: risk management constrains institutions' exposure to risky ABS when they face mark-to-market reporting combined with capital requirements; however, this role is considerably weaker when capital requirements are combined with historical cost accounting. We find suggestive evidence that financial regulations affect risk management functions through promoting risk managers' efforts in uncovering ABS risk and curbing executives' incentives to take excessive risk. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online.
- Subjects
RISK management of financial institutions; FINANCIAL policy; ASSET backed financing; INVESTMENT banking; GLOBAL Financial Crisis, 2008-2009; CAPITAL requirements; COST accounting
- Publication
Review of Financial Studies, 2020, Vol 33, Issue 6, p2506
- ISSN
0893-9454
- Publication type
Article
- DOI
10.1093/rfs/hhz067