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Are Bank Holding Companies a Source of Strength to Their Banking Subsidiaries?
Author(s) -
ASHCRAFT ADAM B.
Publication year - 2008
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/j.1538-4616.2008.00113.x
Subject(s) - subsidiary , business , safer , financial system , financial distress , chinese financial system , finance , capital (architecture) , multinational corporation , computer security , archaeology , computer science , law , political science , china , history
I document evidence that a bank affiliated with a multi‐bank holding company (MBHC) is significantly safer than either a stand‐alone bank or a bank affiliated with a one‐bank holding company. Not only does MBHC affiliation reduce the probability of future financial distress, but distressed affiliated banks are also more likely to receive capital injections, recover more quickly, and are less likely to fail over the next year. Moreover, the measured benefits of affiliation are much larger than those that existed before recent reforms of bank holding company regulation, suggesting that much of the observed benefit can be attributed to regulation and not the market.