The moral hazard problem associated with deposit insurance generates the potential for excessive risk taking on the part of bank owners. The banking literature identifies franchise value -- a firm’s profit-generating potential -- as one force mitigating that risk taking. We argue that in the...

The moral hazard problem associated with deposit insurance generates the potential for excessive risk taking on the part of bank owners. The banking literature identifies franchise value--a firm's profit-generating potential--as one force mitigating that risk taking. We argue that in the...

This paper examines the relationship between asset risk and franchise values and between asset risk and ownership structure. Stock price data from publicly traded S&L is used to measure portfolio risk and franchise or charter values. The empirical results provide support for the moral hazard...