Publications
Publications
- 2023
The Stock Market and Bank Risk-Taking
By: David S. Scharfstein and Antonio Falato
Abstract
Using confidential supervisory risk ratings, we document that banks increase risk after they go public compared to a control group of banks that filed to go public but withdrew their filings for plausibly exogenous reasons. The increase in risk increases short-term performance at the expense of long-term performance. The increase in risk stems from increased pressure to maximize short-term stock prices and earnings once the bank is publicly-traded. After going public, banks that are owned by investors that place greater value on short-term performance increase risk more, and those managed by CEOs with more short-term compensation also increase risk more.
Keywords
Citation
Scharfstein, David S., and Antonio Falato. "The Stock Market and Bank Risk-Taking." Working Paper, September 2023.