Business complexity and risk management: Evidence from operational risk events in U.S. bank holding companies

Abstract Recent regulatory proposals tie a financial institution’s systemic importance to its complexity. However, little is known about how complexity affects banks’ risk management. Using the 1996–1999 deregulations of U.S. nonbanking activities as natural experiment, we show that business increases their operational risk. This result driven by banks had been constrained regulations, compared with other and also nonbank institutions were never subject these regulations. We provide evidence managerial failure underlying events offsets benefits strategic taking.