The Use of Derivatives and Bank Risk Taking in China

Song, Wen

doi:10.2139/ssrn.2500697

Cited by 2 publications

(10 citation statements)

References 39 publications

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“…Chen (2011), Kirti (2017) and Mokni et al (2016) agree that a derivatives activity can support franchise value and weaken market‐wide shocks. In this respect, the use of certain instruments such as interest rate derivatives, forwards and swaps was shown to be easing powers on risk (Cyree et al, 2012; Si, 2014).…”

Section: Bank Risk‐taking Behaviour In the Context Of Derivatives Usementioning

confidence: 99%

“…However, the Modigliani and Miller (1958) theorem may reflect the redundancy of derivatives in banking activities. The relevant theory implies that derivatives activities do not damage or improve the risk profiles of banks (Si, 2014).…”

Section: Introductionmentioning

confidence: 99%

“…Accordingly, the risk alleviation ascribed to derivatives can be supported where the instruments create diversification in banking intermediation services, healthy banking competition, increased efficiency and liquidity and transparency in the financial system. Therefore, the instruments' risk transfer function can dissolve risk‐taking by dispersing bank risk among various economic players (Asongu et al, 2017; Bushman et al, 2016; Cyree et al, 2012; Otchere et al, 2017; Si, 2014).…”

Section: Introductionmentioning

confidence: 99%

“…In contrast, the derivative‐fragility hypothesis postulates that derivatives use incentivises excessive risk‐taking and instabilities across banks (Cyree et al, 2012; Si, 2014). This activity is thought by many to be essentially prone to informational issues, moral hazards and neglects of regulatory measures (Awrey, 2016; Cyree et al, 2012; Mili & Abid, 2017).…”

Section: Introductionmentioning

confidence: 99%

“…The studied dataset was principally sourced from Bankscope. A two‐stage least squares (2SLS) model was defined under linearity and nonlinearity assumptions and implemented in a panel data framework, controlling for endogeneity (or circular causality) among the modelled dependent and independent variables (Chang et al, 2018; Chen, 2011; Ghosh, 2017; Si, 2014).…”

Section: Introductionmentioning

confidence: 99%

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Derivatives use and the risk‐taking behaviour of African banks

Bekale

Alagidede

Mensah

2023

J of Intl Development

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Evidence has been presented that banks typically maintain risk‐exacerbating derivatives positions. Within the context of African economies, this paper focuses on the impact of derivatives activities on the risk‐taking impulse of banks. It also examines the risk‐taking impulse resulting from banks' business lending efficiency. Estimation was carried out using standard ROA—and ROE—based idiosyncratic risk metrics and two‐stage least squares regression. Results indicate unsustainable levels of banking stability and increased risk‐taking. The banks exhibit hazardous behaviour in the current climate of the rapid transformation of the banking systems, calling for regulatory vigilance to limit imprudent actions. [Correction added on 17 March 2023, after first online publication: This version has been updated with a truncated abstract as supplied by the author.]

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Section: Bank Risk‐taking Behaviour In the Context Of Derivatives Usementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Derivatives use and the risk‐taking behaviour of African banks

Bekale

Alagidede

Mensah

2023

J of Intl Development

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Development of China’s Derivatives Market: a Review of Studies

Wang¹

2023

BCPBM

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Under the background of globalization and financial innovation, the derivative markets in China have excellent growth potential as China is accelerating its transition towards a market economy, making it a valuable object for studies in financial derivatives. However, the market is still in its infancy. Relevant research focusing on China’s derivative market is relatively scarce and fragmented compared to those focusing on the developed economy. This paper intends to encourage more scholars to examine the Chinese derivative market and its characteristics by offering a review of the studies on China’s derivative markets, providing forward-looking opinions and direction of future research. The conclusion is as follows: (1) More research focusing on the period of crisis-like event needs to be done since they provide a basis to test the stability of China’s derivative markets; (2) the impact of derivative regulation in China should be carefully considered as the opinion of current research remain divided on this subject; (3) Future research should also focus on comparative analysis of market traits and linkage between China and other developed economies since the Chinese mainland market is adjusting to conform the international standard.

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The Use of Derivatives and Bank Risk Taking in China

Cited by 2 publications

References 39 publications

Derivatives use and the risk‐taking behaviour of African banks

Derivatives use and the risk‐taking behaviour of African banks

Development of China’s Derivatives Market: a Review of Studies

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