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International evidence on the determinants of domestic sovereign debt bank holdings

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Chronopoulos2019_Article_InternationalEvidence_CC.pdf (349.6Kb)
Date
12/2020
Author
Chronopoulos, Dimitris
Dotsis, George
Milonas, Nikolaos T
Funder
The British Academy
Grant ID
SG140376
Keywords
Sovereign debt
Home bias
Moral suasion
Government ownership
HG Finance
3rd-DAS
BDC
R2C
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Abstract
In this paper, we examine the determinants of bank holdings of domestic sovereign debt with a panel dataset of 295 banks in 35 countries between 2002 and 2013. The findings indicate that the structure of bank ownership (domestic, foreign, or government ownership), the quality of governance, and the level of financial development of the countries in which banks operate all determine the level of home bias. Specifically, we find that domestic banks tend to hold more domestic sovereign debt relative to their foreign counterparts. We also provide evidence that home bias is even stronger when the domestic bank is controlled by its government. Moreover, home bias increases when government bonds are more risky, home governments are less effective, and when banking systems are less financially developed. Overall, we find that banks’ home bias in holding sovereign debt is an international phenomenon that is determined by both bank- and country-specific factors.
Citation
Chronopoulos , D , Dotsis , G & Milonas , N T 2020 , ' International evidence on the determinants of domestic sovereign debt bank holdings ' , Journal of Financial Services Research , vol. 58 , no. 2-3 , pp. 143-160 . https://doi.org/10.1007/s10693-019-00326-4
Publication
Journal of Financial Services Research
Status
Peer reviewed
DOI
https://doi.org/10.1007/s10693-019-00326-4
ISSN
0920-8550
Type
Journal article
Rights
Copyright (c) the authors 2019 This article is distributed under the terms of the Creative Commons Attribution 4.0 InternationalLicense (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and repro-duction in any medium, provided you give appropriate credit to the original author(s) and the source, provide alink to the Creative Commons license, and indicate if changes were made.
Description
Funding: British Academy/SAMS Small Research Grant (SG140376).
Collections
  • University of St Andrews Research
URI
http://hdl.handle.net/10023/18770

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