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

Abstract

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.

The Relationship between Bank Capital, Risk-Taking and Profitability: Fresh Evidence from Panel Quantile Approach

“…The findings show that an increase in the traditional capital ratio increases the ROA in all market conditions. The results obtained in the study are consistent with the findings of Gunes (2014), Lee, Ning and Lee (2015), Okuyan and Karatas (2017), Kocaman et al (2018), Kilic (2019), Coccorese and Girardone (2021), Kaya et al (2022), andBoamah et al(2023); however, it differs from the findings of Nur (2022) and Topak and Talu (2017). They found a negative relationship between the variables.…”

“…Isik and Belke (2017) studied 13 commercial banks and concluded a negative relationship between traditional capital and risk-taking. In addition, Nur (2022) conducted a study on seven banks traded in Borsa Istanbul and concluded that the relationship between traditional capital and risk-taking is negative.…”

“…;Mujtaba et al (2022);Nur (2022);Kaya et al (2022);Subhani et al (2022);Boamah et al (2023);Kaplan et al (2023). (2014); Gizaw et al (2015); Lee et al (2015); Jabra et al (2017); Kadioglu et al (2017); Okuyan and Karatas (2017); Topak and Talu (2017); Kocaman et al (2018); Farkasdi et al (2021); Sanic and Sendeniz-Yuncu (2021); Subhani et al (2022); Orgun (2023); Kaplan et al (2023).…”