Operational Risk and Risk Management Quality: Evidence from U.S. Bank Holding Companies

38 Pages Posted: 26 Feb 2016

See all articles by Azamat Abdymomunov

Azamat Abdymomunov

Federal Reserve Banks - Federal Reserve Bank of Richmond

Atanas Mihov

University of Kansas

Date Written: December 1, 2015

Abstract

This study documents the association between the quality of risk management practices and operational loss realizations at large financial institutions in the United States. Using detailed supervisory data, we find that companies with weak risk management practices experience higher and more volatile operational losses. We document the drivers of this relationship across different operational risk event types and risk management dimensions. In addition, we present evidence that the strength of risk management practices prior to the 2008-2009 Financial Crisis has explanatory power over loss realizations during the crisis period. Our analysis provides new evidence of the importance of risk management practices for curtailing risk realizations at financial institutions.

Keywords: Large Financial Institutions; Banks; Risk; Operational risk; Risk Management; Financial Crisis

JEL Classification: G20, G21, G29

Suggested Citation

Abdymomunov, Azamat and Mihov, Atanas, Operational Risk and Risk Management Quality: Evidence from U.S. Bank Holding Companies (December 1, 2015). Available at SSRN: https://ssrn.com/abstract=2738530 or http://dx.doi.org/10.2139/ssrn.2738530

Azamat Abdymomunov

Federal Reserve Banks - Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

Atanas Mihov (Contact Author)

University of Kansas ( email )

1415
Lawrence, KS 66045
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
250
Abstract Views
1,084
Rank
222,467
PlumX Metrics