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Risk and the Corporate Structure of Banks Banks organize their foreign affiliates as separately incorporated subsidiaries, or as branches whose liabilities represent claims on the parent institution. Different risks influence this decision. Subsidiary-based corporate structures benefit from the greater protection against economic (credit) risk provided by affiliate-level limited liability, but are more exposed to the risk of capital expropriation, against which branch structures are protected. Moreover, branch structures benefit fromamore efficient internal market for bank capital. Greater cross-country risk correlation and more accurate pricing of risk by investors reduce the differences between the two structures. Finally, the bank’s corporate structure affects risk taking and affiliate size. Abstract, full text available for download. 2008






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Status: 10. Februar 2009