Are Charter Value and Supervision Aligned? A Segmentation Analysis

26 Pages Posted: 15 May 2017

See all articles by Juan Aparicio

Juan Aparicio

University Miguel Hernandez - Center of Operations Research

Miguel A. Duran

University of Malaga

Ana Lozano-Vivas

University of Malaga

Jesús T. Pastor

Miguel Hernandez University

Date Written: May 15, 2017

Abstract

Previous work suggests that the charter value hypothesis is theoretically grounded and empirically supported, but not universally. Accordingly, this paper aims to perform an analysis of the relations among charter value, risk taking, and supervision that take into account the relations’ complexity. Specifically, using the CAMELS rating system as a general framework for supervision, we carry out a segmentation analysis of how charter value relates to risk and supervision by means of classification and regression tree techniques. The sample covers the period 2005–2014 and consists of listed banks in countries that were members of the eurozone when it came into existence, along with Greece. Our results reflect the complexity of the relations among charter value, supervision, and risk. Indeed, supervision and charter value seem aligned regarding only some types of risk, but the relation is not constant through time or across countries.

Keywords: Bank supervision, CAMELS, CARTS, charter value, risk

JEL Classification: G21, G28

Suggested Citation

Aparicio, Juan and Duran, Miguel A. and Lozano-Vivas, Ana and Pastor Ciurana, Jesús Tadeo, Are Charter Value and Supervision Aligned? A Segmentation Analysis (May 15, 2017). Available at SSRN: https://ssrn.com/abstract=2968389 or http://dx.doi.org/10.2139/ssrn.2968389

Juan Aparicio

University Miguel Hernandez - Center of Operations Research ( email )

Instituto CIO
Av. de la Universidad s/n.
Elche (Alicante), Alicante 03202
Spain

Miguel A. Duran

University of Malaga ( email )

Dpt. of Economics
Business School
Malaga, 29013
Spain

HOME PAGE: http://webpersonal.uma.es/~maduran/portada.htm

Ana Lozano-Vivas (Contact Author)

University of Malaga ( email )

Dept. of Economics
Malaga, MALAGA 29071
Spain
+34952131256 (Phone)

HOME PAGE: http://www.uma.es/departamento-de-teoria-e-historia-economica/info/50200/ana-lozano-vivas/

Jesús Tadeo Pastor Ciurana

Miguel Hernandez University ( email )

Elche Campus, La Galia Building
Avda. del Ferrocarril, s/n
Elche, 03202
Spain
+34 96-665-8621 (Phone)
+34 96-665-8715 (Fax)

HOME PAGE: http://www.umh.es/frame.asp?url=/busquedas/resultados.asp?qu=Jesus%20T.%20Pastor

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