Bank credit risk and sovereign debt exposure: moral hazard or hedging?

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dc.contributor.authorBaselga Pascual, Laura
dc.contributor.authorLobán Acero, Lidia
dc.contributor.authorMyllymäki, Emma Riikka
dc.date.accessioned2025-02-17T09:14:01Z
dc.date.available2025-02-17T09:14:01Z
dc.date.issued2025-01
dc.date.updated2025-02-17T09:14:01Z
dc.description.abstractThis study investigates the relationship between credit risk and bank exposure to sovereign debt. Using an international dataset of commercial banks from 2002 to 2022, we apply various regressions and panel data models to address potential endogeneity issues. Our results reveal that banks with higher levels of impaired loans tend to hold more sovereign debt. Furthermore, we observe that this relationship is stronger in countries with high sovereign credit ratings. This suggests that banks, when confronted with elevated credit risk from impaired loans, may seek safety in sovereign debt as a seemingly secure investment.en
dc.description.sponsorshipWe would like to thank participants of the 31st Finance Forum, the Deusto Business School seminars, Reint Gropp, Denis Davydov, and Marina Martínez-Malvar for their valuable comments. Laura Baselga-Pascual is grateful to grant IT-1497\u201322 from the Department of Education of theBasque Government.en
dc.identifier.citationBaselga-Pascual, L., Loban, L., & Myllymäki, E.-R. (2025). Bank credit risk and sovereign debt exposure: Moral hazard or hedging? Finance Research Letters, 71. https://doi.org/10.1016/J.FRL.2024.106454
dc.identifier.doi10.1016/J.FRL.2024.106454
dc.identifier.issn1544-6123
dc.identifier.urihttps://hdl.handle.net/20.500.14454/2311
dc.language.isoeng
dc.publisherElsevier Ltd
dc.rights© 2024 The Authors
dc.subject.otherBank risk
dc.subject.otherCredit risk
dc.subject.otherFinancial institutions
dc.subject.otherSovereign debt nexus
dc.titleBank credit risk and sovereign debt exposure: moral hazard or hedging?en
dc.typejournal article
dcterms.accessRightsopen access
oaire.citation.titleFinance Research Letters
oaire.citation.volume71
oaire.licenseConditionhttps://creativecommons.org/licenses/by/4.0/
oaire.versionVoR
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