This paper offers evidence that bank managers adjust key strategic variables following a risk and/or valuation signal. Banks receive a risk signal when they have a substantially higher volatility compared to the best performing bank(s) with similar business model characteristics, and a valuation...

We investigate whether sovereign bond holdings of European banks are determined by a risk-return trade-off. Using data between 2011 and 2018 for 75 European banks, we confirm that banks exhibited risk-taking behavior during the sovereign debt crisis, e.g., due to moral suasion. In the period...