What the study found
The study found that parent firms did not reliably support distressed subsidiaries during the 2007–2009 financial crisis. Instead, bank holding companies (BHCs) favored stronger, more liquid, and more resilient affiliates when allocating internal capital.
Why the authors say this matters
The authors conclude that regulatory assumptions about automatic parent support do not match actual behavior. They suggest that monitoring sibling fragility across conglomerates, nonbank affiliates, and intra-group capital flows may be needed to improve financial stability.
What the researchers tested
The researchers examined the 2007–2009 financial crisis using novel measures of sibling distress and detailed parent-affiliate funding flows within BHCs. They assessed how capital moved across affiliates and how that pattern changed under stress.
What worked and what didn't
Capital allocation within BHCs disproportionately favored stronger affiliates. The results indicate that profitable parents became more selective under stress, while nonbank subsidiaries acted as important internal liquidity providers when external markets froze. Support for weaker affiliates was limited.
What to keep in mind
The abstract does not describe specific limitations beyond the study's focus on the 2007–2009 crisis and bank holding companies. The findings are presented as evidence about internal capital markets during that period, not as a broader test of all firms or crises.
Key points
- Parent support for distressed subsidiaries was selective, not reliable, during the 2007–2009 crisis.
- Bank holding companies allocated more capital to stronger, more liquid, and more resilient affiliates.
- Profitable parents became more selective under stress.
- Nonbank subsidiaries provided internal liquidity when external markets froze.
- The authors say supervisory frameworks should monitor sibling fragility and intra-group capital flows.
Disclosure
- Research title:
- Bank holding companies favored stronger affiliates during crisis
- Authors:
- Nilufer Ozdemir
- Institutions:
- University of North Florida
- Publication date:
- 2026-02-04
- DOI:
- 10.3390/jrfm19020116
- OpenAlex record:
- View
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