Abstract/Summary

This thesis is motivated by the importance of large financial institutions and their riskiness. The 2008 financial crisis showed us how complicated the structure of financial institutions and the opaque interconnection. Three empirical studies are conducted to deal with the classification and risk of financial institutions. Firstly, the accuracy of financial industry classifications, namely ICB, GICS, BICS, SICUS, NAICS, SICUK, is testified for the superiority of the complex industry classification systems. The empirical findings indicate that the higher the hierarchy level (the narrowest level), the less the accurate rate of the industry classification. The static ICB scheme accuracy is consistent across levels, which provides superiority among the others for grouping stocks with similar operating characteristics. This study points out the importance of the industry specific risk exposure through the empirical evidence of non-effective classification schemes. Secondly, the impact of the designation of Global Systemically Important Banks (G-SIBs) on its risk is investigated. The empirical findings suggest that the introduction of G-SIBs reduced the risk of banks on average significantly compared to their counterparts in the financial market. In the aim of avoiding or reducing the likelihood and severity of issues that emanate from the failure of G-SIFIs/G-SIBs, this essay provides empirical evidence to policymakers for the designation of Global Systemically Important Banks (G-SIBs) or Financial Institutions (G-SIFIs). Thirdly, the impact of financial inclusiveness on large banks' performance and risk is further studied in this thesis. The empirical evidence supports the statement that high financial inclusiveness enhances performance and reduces the risk of financial services providers. What’s more, the degree level of the financial inclusion matters (the higher, the better). The empirical findings solve the problems between policymakers and practitioners on establishing an inclusive financial system, particularly the need for access and quality to financial services to poor economies or people.