Hakenes, Hendrik; Schnabel, Isabel - Max-Planck-Institut zur Erforschung von … - 2004
The explicit or implicit protection of banks through government bail-out policies is a universal phenomenon. We analyze … main result is that the bail-out policy unambiguously leads to higher risk-taking at those banks that do not enjoy a bail-out … guarantee. The reason is that the prospect of a bail-out induces the protected bank to expand, thereby intensifying competition …