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Seminar - Did Post-Crisis Government Bailouts Reduce Systemic Risk in European Banks?

Speaker: Victor Murinde, AXA Professor in Global Finance, SOAS University of London
Venue: TBC

Abstract
We investigate whether government bailouts, post the global financial crisis (2007-08), were helpful in reducing systemic risk in European banks. We innovate in measuring systemic risk and in invoking difference-in-difference methodology to examine the impact of bailout programmes on systemic risk in bailout banks versus non-bailout banks. We find that the bailout packages attenuated the transmission of systemic risk to European banks. However, bank heterogeneity matters: Although the findings hold for large and small banks as well as high risk and low risk banks, pronounced reduction in systemic risk is only associated with highly capitalised banks and low liquidity banks. 

JEL codes: G18, G21, G28, C49

Keywords: bailouts, banking, systemic risk, financial crises, multivariate extreme value theory

Co-authors: Sajid M. Chaudhry, Samuel Fosu, Wasim Ahmad

Sajid M. Chaudhry (Corresponding author) is at Economics, Finance and Entrepreneurship Group, Aston Business School, University of Aston, UK (e-mail: s.chaudhry9@aston.ac.uk). Samuel Fosu is at Department of Accounting and Finance, Leicester Castle Business School, De Montfort University, Leicester, UK (e-mail: Samuel.fosu@dmu.ac.uk). Wasim Ahmad is at Department of Finance, Birmingham Business School, University of Birmingham, UK (e-mail: w.ahmad@bham.ac.uk). Victor Murinde is at School of Finance and Management, SOAS University of London, UK (e-mail:v.murinde@soas.ac.uk).

A sandwich lunch will be served.

The seminars are sponsored by grants from DFID and ESRC [ESRC Ref: ES/N013344/2], ESRC and NSFC [ESRC Ref: ES/P005241/1] and AXA Research Fund