Skip to: search, navigation, or content.

Indiana University Bloomington

Department of Finance

Have a Question?

Please feel free to contact us.



Our top-ranked finance faculty are authors of leading textbooks.

Research and Publications

Journal Articles

Liberalization and Risk Taking: Evidence from Government-Controlled Banks

2014, forthcoming Review of Finance

M. Illueca Muñoz, L. Norden, G. F. Udell


We study the effects of the interplay between deregulation and governance on risk taking in the financial industry. We consider a large natural experiment in Spain where the removal of regulatory geographic constraints for savings banks led to a nationwide expansion of these banks during the past two decades. Based on a unique data set that combines information on the geographic distribution of bank lending, matched lender-borrower financial statements, and borrower defaults, we find that the governance of savings banks significantly affects the way in which they expand their lending activities. In particular, political influence at these banks is associated with higher ex ante risk taking and higher ex post loan defaults. Our study highlights the broader implications of the impact of global deregulation and consolidation and their interaction with governance issues.


Muñoz, Manuel Illueca, Lars Norden and Gregory F. Udell (2014), “Liberalization and Risk Taking: Evidence from Government-Controlled Banks,” forthcoming, Review of Finance.