Financial contagion and intra-group spillover effects

The main intention of this thesis is the assessment of spillover effects between
financial group constituents. In order to understand the relevance of this issue, we
first have to delve into the economic rationale of financial intermediaries and their
deficiencies with respect to contagion in particular. A general discussion of the
contagion literature and a brief evaluation of potential driving forces in the current
economic environment will provide first insights into the topic.
Based on these primary aspects of contagion, a more intense and more focused
treatment of the research question follows. Both an analytical and an empirical
analysis of intra-group spillover effects are conducted by providing different
possible approaches with the same ultimate objective, i.e. the observation or proof
of contagious effects among group constituents.
Finally, the practical implications for the industry are discussed and contrasted with
the common argument of diversification effects within larger group portfolios. Put
simply, it is discussed to what extent positive group externalities can compensate
for the negative externalities that we have treated in the sections before. Eventually,
this will also have a strong and important impact on the determination of potential
group capital adequacy requirements and hence is both of extraordinary interest for
the financial industry and theorists.

University of St. Gallen
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Bernhard Mayr
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ResourceID: 72576

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