More loans more risk-taking? The case of the U S banks

  • 蔡 采吟

Student thesis: Master's Thesis


The paper uses the commercial banks in the U S that joined the Federal Deposit Insurance Corporation (FDIC) as the samples during the 1984Q1-2015Q3 The structure of the thesis involves the use of time series data and a multiple regression is built to assess a time series model and analyze whether macroeconomic conditions can contribute significantly to the level of non-performing loans to total loans in the U S banking system Further we want to explore whether the non-performing loans fluctuate in accordance with the macroeconomic condition along with in boom or in recession Finally we examine whether the non-performing loans have an indirect influence on banks’ asset quality and to check whether lending decisions of U S banks exhibit moral hazard Our results show that the non-performing loans actually fluctuate associated with business cycle When the economy is in bust the ratio of the non-performing loans raises up Through the time series model it can be proved that there are significantly positive correlation between non-performing loans and the ratio of risk weighted assets It represents the non-performing loans affect the asset quality indirectly Moreover we can find the non-performing loans versus risk weighted assets risk weighted assets versus banks’ loans and the banks’ loans versus non-performing loans have significant Granger-cause relations The phenomenon explains that a bank’ managers have an incentive to lend more loans when the bank’s risk enhances The result of the thesis is consistent with the moral hazard hypothesis
Date of Award2016 Jun 27
Original languageEnglish
SupervisorTse-Shih Wang (Supervisor)

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