Dynamics of diversification and banks' risk‐taking and stability: Empirical analysis of commercial banks

2021 ◽  
Author(s):  
Faisal Abbas ◽  
Shoaib Ali
Keyword(s):  
Empirical Analysis ◽  
Risk Taking ◽  
Commercial Banks

scholarly journals Employment Protection and Banking Power: Evidence from Adoption of Wrongful Discharge Laws

2021 ◽  
Vol 13 (4) ◽  
pp. 1635
Author(s):  
Desheng Yin ◽  
Xinting Zhen
Keyword(s):  
Risk Taking ◽  
Commercial Banks ◽  
Vital Role ◽  
Sustainable Growth ◽  
Employment Protection ◽  
Labor Costs ◽  
Bank Efficiency ◽  
Exogenous Shock ◽  
Wrongful Discharge ◽  
Cost Inefficiency

Human capital and labor costs are crucial for the sustainable growth of organizations, and take a vital role in affecting bank efficiency and banking power. This research empirically investigates whether labor employment protection affects banking power. The analysis exploits the staggered adoption of Wrongful Discharge Laws (WDLs) as a quasi-exogenous shock to employment protection. A Difference-In-Difference research design is implemented to study the impacts of WDLs on banking power, and the main results show that there exists a decline of banking power for commercial banks headquartered in states that adopt employment protection. This study further tests the main mechanism through which WDLs affect banking power and finds that the impaired banking power is primarily due to cost inefficiency but not profit inefficiency. Moreover, the adoption of wrongful discharge laws increases commercial banks’ labor costs and induces bank risk-taking.

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