Insight :: Finance

Bank stocks - does risk management matter?

Do stock markets reward financial institutions, such as banks, for risk-taking or for risk-management? Most economists agree that highly skewed incentives drove financers to undertake risks that pushed the world economy to the brink.

While tighter regulation is being touted as a potential solution, are markets already factoring risk management capability of a bank in its stock price? Professor M. Jayadev and co-author Rudra Sensarma studied the performance of Indian banks in the recent past to answer this question.

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