Do banks diversify portfolio risk? a test of the risk-cost hypothesis

Shin'ichi Hirota*, Yoshiro Tsutsui

*この研究の対応する著者

研究成果: Article査読

3 被引用数 (Scopus)

抄録

proposes the risk-cost hypothesis that banks decide the number of loans by considering the costs arising from diversifiable portfolio risk. Thus, the banks do not minimize operation costs, but total costs including risk costs. This paper examines empirically whether the risk-cost hypothesis is valid, using financial panel data from Japanese banks from 1981 to 1994. Estimating the first-order condition of total cost minimization together with an operation cost function, we find that the hypothesis is supported. Dividing the sample into different types of banks, it is found that the hypothesis is valid for city and regional banks, but not for second regional banks.

本文言語English
ページ(範囲)29-39
ページ数11
ジャーナルJapan and The World Economy
11
1
DOI
出版ステータスPublished - 1999 1月 1

ASJC Scopus subject areas

  • 財務
  • 経済学、計量経済学
  • 政治学と国際関係論

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