The purposes of this research are to examine bank risk taking behavior and its relationship with bank charter value, particularly whether the responses of risk measures to charter value are different for banks with high and low level of charter value for the five European countries (France, Germany, Italy, Spain and the UK) during the period 1993-2002. By employing Galloway et al’s (1997) empirical model, the findings are partially consistent with their results. The consistency is the acceptance of the ‘moral hazard’ hypothesis that banks with low charter value are more apt to engage in high risk taking strategies. Further analyses found this behavior was constrained in the early 2000s. Moreover, it is interesting that the results also illustrate that risk taking increased with bank charter value over the period, which rejects the ‘bankruptcy cost’ hypothesis that when banks charters are valuable, they are more likely to be risk aversion due to the fear of potential losses of their valuable charters. Overall, the pooled data indicate that there is a non-linear relationship between risk taking behavior and bank charter value.