[...]In this article, we explore the relationship betweenfranchise value and risk taking over the 1986-94 period.We extend Keeley’s empirical analysis by estimating theeffect of franchise value on a variety of measures of bankrisk. We find an inverse relationship between franchisevalue and an...

As protectors of the safety and soundness of the banking system, banking supervisors are responsible for keeping banks' risk taking in check. The authors explain that franchise value - the present value of the stream of profits that a firm is expected to earn as a going concern - makes the...