scholarly journals Estimating Risk and Excessive Risk-Taking in Colombia’s Commercial Banks

2012 ◽  
Vol 70 (1) ◽  
pp. 187-218
Author(s):  
Diego Ramos ◽  
Keyword(s):  
Risk Taking ◽  
Commercial Banks ◽  
Excessive Risk Taking ◽  
Excessive Risk

scholarly journals Market structure, institutional quality and bank capital ratios: evidence from developing countries

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Oyebola Fatima Etudaiye-Muhtar ◽  
Zayyad Abdul-Baki
Keyword(s):  
Market Structure ◽  
Risk Taking ◽  
Commercial Banks ◽  
Institutional Quality ◽  
Bank Capital ◽  
Content Type ◽  
Regulatory Quality ◽  
Capital Ratios ◽  
Excessive Risk Taking ◽  
Excessive Risk

PurposeThis paper investigates the role of market structure and institutional quality in determining bank capital ratios in developing economies.Design/methodology/approachThe generalised methods of moment technique is used to control for auto-correlation and endogeneity in a sample of 79 publicly listed commercial banks. The study period is between 2000 and 2016.FindingsResults show that market structure (proxied with bank competition) as well as institutional quality (regulatory quality) lowers bank capital in the sampled banks. This suggests that banks operating in less competitive markets with good regulatory quality do not need to engage in excessive risk-taking activities that would necessitate holding increased level of capital. Furthermore, the interaction of competition and regulatory quality reinforces the main findings, suggesting the importance of the two variables in determining bank capital ratio.Research limitations/implicationsResearch has limitation in that the study investigated publicly listed commercial banks, the findings may not be applicable to non-listed banks.Practical implicationsTaking into cognisance the developing nature of the banking system in Africa, the findings from this study imply that the maintenance of an improved regulatory quality in an environment where healthy competition exists would encourage banks to hold capital ratios appropriate for their level of banking activities, that is, the banks would not engage in excessive risk-taking activities.Originality/valueThis is one of the first papers that examine the effect of market structure and institutional quality on bank capital ratios in developing countries that have bank-based financial systems.

scholarly journals Relative Deprivation and Hope: Predictors of Risk Behavior

2020 ◽  
Author(s):  
Shahriar Keshavarz ◽  
Kenny R. Coventry ◽  
Piers Fleming
Keyword(s):  
Risk Behavior ◽  
Risk Taking ◽  
Relative Deprivation ◽  
Gambling Behavior ◽  
Maladaptive Behaviors ◽  
Negative Effects ◽  
Potential Applications ◽  
Escape Behaviors ◽  
Excessive Risk Taking ◽  
Excessive Risk

AbstractThe belief that one is in a worse situation than similar others (Relative Deprivation) has been associated with involvement in a range of maladaptive escape behaviors, including excessive risk taking. Yet not everyone scoring high on measures of relative deprivation makes maladaptive choices. We hypothesized that hope may ameliorate the negative effects of relative deprivation. In two laboratory-based experiments using a novel risk-taking task (N = 101) we show that hope reduces risk-taking behavior in relatively deprived participants. A third study (N = 122) extended the moderating effect of hope on relative deprivation to real-world risk behavior; increased hope was associated with decreased likelihood of loss of control of one’s gambling behavior in relatively deprived individuals. Nurturing hope in relatively deprived populations may protect them against maladaptive behaviors with potential applications for harm reduction.

scholarly journals Anxiety, Overconfidence, and Excessive Risk Taking

2015 ◽  
Author(s):  
Thomas M. Eisenbach ◽  
Martin C. Schmalz
Keyword(s):  
Risk Taking ◽  
Excessive Risk Taking ◽  
Excessive Risk

scholarly journals The gift that keeps on giving: corporate giving and excessive risk-taking

2021 ◽  
Author(s):  
Colleen M. Boland ◽  
Corinna Ewelt-Knauer ◽  
Julia Schneider
Keyword(s):  
Risk Taking ◽  
Personal Responsibility ◽  
Charitable Donations ◽  
Corporate Giving ◽  
The Gift ◽  
Csr Strategy ◽  
Shape Curve ◽  
Excessive Risk Taking ◽  
Excessive Risk ◽  
Project Level

AbstractCorporations have recently started incorporating employees’ prosocial preferences into their incentive schemes, including charitable donations (corporate giving). These donations are mainly discussed in conjunction with the external effects of a firm’s CSR strategy. However, this experiment examines the effect of donations on internal firm operations. Specifically, we investigate whether the presence and structure of corporate giving influences employees’ excessive risk-taking. Such prosocial activities may remediate misaligned incentives often cited as drivers for employees to take excessive risks. Contrary to widespread practice, our experimental evidence suggests that firms could constrain employees' excessive risk-taking by linking existing contributions to project rather than corporate performance, thus providing boundaries around an employee’s involvement in CSR initiatives. We identify project-level giving as an unexplored CSR benefit and infer that personal responsibility effectively changes an employee’s incentive package. Our findings suggest an inverted U-shape curve of effectiveness.

Competition, Regulation, and Stability in Banking: Theory and Evidence

2016 ◽  
Author(s):  
Xavier Vives
Keyword(s):  
Risk Taking ◽  
Systemic Risk ◽  
Banking Sector ◽  
Regulatory Reform ◽  
Reform Process ◽  
Subprime Crisis ◽  
Empirical Perspective ◽  
The Relationship ◽  
Excessive Risk Taking ◽  
Excessive Risk

This chapter examines the relationship between competition and stability in the banking sector both from a theoretical and from an empirical perspective. It considers the competition–stability link from the standpoint of fragility both because of runs and because of excessive risk taking, along with the available evidence assessing how competition relates to systemic risk and how deregulation is associated with risk taking. It also explores the connection between market structure, consolidation, and internationalization and how it affects stability. Lessons from the subprime crisis are derived. The result of the analysis is to characterize the competition–stability trade-off, how regulation can alleviate it, and the need to coordinate competition policy and prudential regulation. The chapter concludes with a discussion of the regulatory reform process in the banking industry after the 2007–2009 crisis.

Managerial Equity Holdings and Income Smoothing Incentives

2017 ◽  
Vol 31 (1) ◽  
pp. 195-218 ◽  
Author(s):  
Sydney Qing Shu ◽  
Wayne B. Thomas
Keyword(s):  
Risk Taking ◽  
Agency Problems ◽  
Discretionary Accruals ◽  
Stock Option ◽  
Income Smoothing ◽  
Future Earnings ◽  
Future Performance ◽  
Excessive Risk Taking ◽  
Excessive Risk ◽  
Equity Holdings

ABSTRACT We explore how managerial stock holdings and option holdings affect CEOs' income smoothing incentives. Given the different roles of stock holdings and option holdings in solving agency problems, managers may smooth past earnings using discretionary accruals for the purpose of revealing information to help investors better predict future earnings or for the purpose of hiding volatility of past earnings. We find the association between past smoothing and predictability of future earnings is increasing (decreasing) in CEO stock (option) holdings. Results are consistent with stock holdings aligning the interests of managers and shareholders, and managers using discretionary accruals to smooth past earnings to reveal information to investors about future performance. In contrast, option holdings have been linked with excessive risk taking by managers, and managers use discretionary accruals to mask volatility of less predictable earnings. We demonstrate that income smoothing can be informative or opportunistic, depending on the incentives of CEOs.

The Effect of High Power Financial Incentives on Excessive Risk-Taking Behavior: An Experimental Examination

2016 ◽  
Vol 29 (1) ◽  
pp. 13-29 ◽  
Author(s):  
Alisa G. Brink ◽  
Jessen L. Hobson ◽  
Douglas E. Stevens
Keyword(s):  
Low Power ◽  
High Power ◽  
Risk Taking ◽  
Financial Incentives ◽  
Optimal Level ◽  
Agency Cost ◽  
Best Interest ◽  
Risk Taking Behavior ◽  
Excessive Risk Taking ◽  
Excessive Risk

ABSTRACT Recent attempts by policy makers to rein in high power financial incentives are predicated on the belief that such incentives cause managers to engage in excessive risk taking that is not in the best interest of the firm. This potential agency cost, however, has received little attention in the management accounting literature. We examine the effect of incentive power on excessive risk-taking behavior in a controlled experimental setting where managers make incentivized risk choices that affect the pay of the manager and another participant representing the firm. Our main results are, first, that the high power incentive generates more excessive risk taking than the low power incentive, despite both incentives being equivalent in expected value at the optimal level of risk for the firm. Second, changing from the low power to the high power incentive significantly increases excessive risk taking, but changing from the high power to the low power incentive does not significantly decrease excessive risk taking, indicating a stickiness effect that may hinder attempts to decrease this behavior. These results provide useful insights for agency theory and public policy. JEL Classifications: C91; C92; D80; G30; J30; M40.

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