Capital regulation and bank risk‐taking – new global evidence

Dias, Roshanthi

doi:10.1111/acfi.12595

Cited by 20 publications

(17 citation statements)

References 64 publications

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“…(1) (Altunbas et al, 2007;Deelchand & Padgett, 2009;Dias, 2020;Ding & Sickles, 2018;Jokipii & Milne, 2011;Lee & Hsieh, 2013). After the transformation, the above equations can be written as:…”

Section: Econometric Modelmentioning

confidence: 99%

“…The enrich studies explore the comparison between the conventional and Islamic banks (Jawadi et al, 2016;Tafri et al, 2011;Rahmawati & Karim, 2016). In recent literature, numerous studies explore the interrelationship among bank capital level, risk-taking, and profitability for conventional banks (Balla & Rose, 2019;Bitar et al, 2018;Deelchand & Padgett, 2009;Dias, 2020;Ding & Sickles, 2018;Paroush & Schreiber, 2019). Surprisingly, in Islamic banking, researchers have ignored a similar investigation of bank capital, risk-taking, and profitability.…”

Section: Introductionmentioning

confidence: 99%

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Untitled

2022

AAMJAF

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This study aims to explore the interrelationship between risk-based capital, risktaking, and profitability. This study employs two-stage least square (2SLS) methods on the annual data of 217 Islamic banks from 35 countries ranging from 2010 to 2019. We find that the relationship between risk-based capital and risk-taking behaviour is negative, and the results are heterogeneous across different regions concerning both signs and significance. Consistent with the theory of moral hazard, we find the negative relationship between risk-based capital and Islamic banks' risk-taking behaviour, implying that managers in Islamic banks could increase their investment in risky assets and keep only smaller amounts of capital. The concept of profit and loss sharing motivates them to take a higher risk and aim to get a higher yield. This relationship is also in line with the agency theory, inferring that bank managers could take excessive risk to get higher compensation to align with higher profitability. The results also reveal a positive relationship between risk-taking and profitability, which

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Section: Econometric Modelmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Untitled

2022

AAMJAF

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“…Çalışma sonucunda devlet ve yabancı sahiplik yapısının yüksek riskli bankalarda risk alma eğilimini pozitif yönde etkilediğini tespit etmiştir. Dias (2021), çalışmasında 135 ülke üzerinde sermaye düzenlemesi ve bankaların risk alma eğilimi arasındaki ilişkiyi araştırmıştır. Çalışmanın sonucunda sermaye oranları arttıkça bankaların başlangıçta daha az risk aldığını ve zamanla risk alma eğilimlerinin arttığını tespit etmişlerdir.…”

Section: Li̇teratür Taramasiunclassified

“…Literatürde bankaların Z puanı ile risk alma davranışı düzeylerinin belirlenmesine ilişkin çalışmalar sonrasında iyi bir risk yönetimi için risk alma eğilimini etkileyen faktörler ile ilgili çalışmalar da araştırma konusu olmuştur. Literatür incelendiğinde bankaların risk alma eğilimini, sahiplik yapısı, yönetim kurulu yapısı, banka büyüklüğü, imtiyaz değeri, likidite, bankacılık düzenlemeleri, sermaye yeterliliği, temsil maliyetleri, FinTech ve makroekonomik değişkenler gibi çeşitli faktörlerin etkilediği gözlemlenmektedir (örn., Saunders vd., (1990), Demsetz vd., (1997), Konishi ve Yasuda (2004), Rachdi ve Ameur (2011), Jabra vd., (2017, Bouheni (2019), Kuzu ve Çelik (2020), Dias (2021), Wang vd., (2021)). Bu kapsamda çalışmada Borsa İstanbul Banka Endeksi'nde işlem gören bankaların risk alma eğiliminin (Z-Skor) belirleyicilerinin araştırılması amaçlanmıştır.…”

Section: Introductionunclassified

Specific Factors Affecting Risk-Taking Behaviour: Panel Cointegration and Causality Analysis on Bist Bank Index

NUR

2022

PAUSBED

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In the study, it is aimed to investigate the determinants of risk-taking behavior of banks traded in Borsa Istanbul Bank Index in the period of December 2000 - December 2020 by panel cointegration and causality analysis. Risk-taking behavior of banks is measured with Z-Score. Ratios related to financial structure (Equity/Total Asset), asset quality (Net Credit/Total Asset), performance (Net Profit/Total Asset), liquidity (Amihud Ratio) and franchise value ((Market Value + Total Debt) /Total Asset) was included in the analysis as an independent variable. As a result of the analyzes carried out, it has been determined that there is a long-term cointegration relationship between the variables and that the increase in the Equity / Total Assets Ratio, return on assets and insufficient liquidity reduces the risk-taking behavior. In addition, a one-way causality relationship has been determined from risk-taking behavior to return on assets, from franchise value to risk-taking behavior and from lack of liquidity to risk-taking behavior.

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“…Regulators have been increasing their efforts to monitor banks to avoid excessive risk-taking (Luu, 2015). Regulatory reforms are intended to reduce excessive risk-taking by banks, limiting bank failures and ensuring the soundness of the financial system (Dias, 2020). Capital regulation affects the risk-taking of banks lowering the threshold of regulatory arbitrage through financial innovation (Ashraf et al , 2016).…”

Section: Introductionmentioning

confidence: 99%

Diversification, corporate governance, regulation and bank risk-taking

Hunjra

Hanif

Mehmood

et al. 2020

JFRA

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Purpose The purpose of this paper is to investigate the impact of diversification, corporate governance and capital regulations on bank risk-taking in Asian emerging economies. Design/methodology/approach The authors applied the generalized method of moments to analyze a sample of 116 listed banks of ten Asian emerging economies for the years 2010–2018. Findings The authors found that diversification, board size, CEO duality and board independence, block holders and capital regulations significantly affect bank risk-taking. In particular, nontraditional income sources such as noninterest income and adoption of diversification strategies minimize bank risk-taking. Practical implications It is expected that the outcomes of this study can be used by banks in Asian emerging economies that seek to reduce risk-taking by managing the diversification of their income streams and managing the impacts of capital regulation and implementing sound corporate governance features in monitoring their operations. This study suggests practical risk minimizing strategies for banks. First is the sourcing of nontraditional income and adoption of diversification strategies. Second, maintaining nonexecutive directors on the board would enhance monitoring of business activities. Third, maintaining deposit insurance would reduce bank’s risk. Government provides insurance to depositors to motivate them to deposit their funds into the banks. This, in return, facilitates banks to overcome risk. However, banks need to be cautious of any increase in capital ratio, as channeling funds into risky investments would increase risk. Originality/value This study is the first to investigate the impacts of corporate governance, diversification and regulation on bank’s risk-taking in a cross-country setting of ten Asian emerging economies.

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Capital regulation and bank risk‐taking – new global evidence

Cited by 20 publications

References 64 publications

Untitled

Untitled

Specific Factors Affecting Risk-Taking Behaviour: Panel Cointegration and Causality Analysis on Bist Bank Index

Diversification, corporate governance, regulation and bank risk-taking

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