scholarly journals The Need for Liquidity and the Capital Structure of Swedish Banks Following the Financial Crisis

2016 ◽  
Vol 3 (2) ◽  
pp. 10
Author(s):  
Victor Nilsson ◽  
Joakim Nordstrom ◽  
Krister Bredmar
Keyword(s):  
Financial Crisis ◽  
Capital Structure ◽  
Risk Reduction ◽  
Risk Taking ◽  
New Markets ◽  
Risk Seeking ◽  
The Stability ◽  
The Impact ◽  
Excessive Risk Taking ◽  
Excessive Risk

<p><em>Banks had a large part in the developments taking place in the years after the outbreak of the crisis in 2007, as many banks had an excessively low capital base, involving too much risk in its businesses. In this study, the largest four banks in Sweden have been investigated. The financial crisis affected the banks differently, depending on the markets of expansion. Excessive risk-taking has been found, where one bank expanded aggressively into new markets and did not appreciate the risks on these new markets. CEO compensation and risk seeking boards are factors that might have caused such behaviour. All of the banks have made noticeable changes to their capital structure, increasing it annually, accompanied by a risk-reduction movement in their assets to improve the stability in most of the banks. The new regulation’s focus on both quality and quantity is in accordance with the views that are expressed in the framework. The banks have altered their goals to levels several per cent above the regulations, in contrast to before the crisis when they were often as close as possible. The impact of the new liquidity regulations has been limited, as the banks continue to work with their internal measures. The banks have all changed their view of capital ratio and liquidity, where many of the banks have doubled the amount of these posts and now find these measures to be both beneficial and a way to gain trust and stability.</em><em></em></p>

scholarly journals The Need for Liquidity and the Capital Structure of Swedish Banks Following the Financial Crisis

2014 ◽  
Vol 3 (2) ◽  
pp. 10-27 ◽  
Author(s):  
Victor Nilsson ◽  
Joakim Nordstrom ◽  
Krister Bredmar
Keyword(s):  
Financial Crisis ◽  
Capital Structure ◽  
Risk Reduction ◽  
Risk Taking ◽  
New Markets ◽  
Risk Seeking ◽  
The Stability ◽  
The Impact ◽  
Excessive Risk Taking ◽  
Excessive Risk

Banks had a large part in the developments taking place in the years after the outbreak of the crisis in 2007, as many banks had an excessively low capital base, involving too much risk in its businesses. In this study, the largest four banks in Sweden have been investigated. The financial crisis affected the banks differently, depending on the markets of expansion. Excessive risk-taking has been found, where one bank expanded aggressively into new markets and did not appreciate the risks on these new markets. CEO compensation and risk seeking boards are factors that might have caused such behaviour. All of the banks have made noticeable changes to their capital structure, increasing it annually, accompanied by a risk-reduction movement in their assets to improve the stability in most of the banks. The new regulation’s focus on both quality and quantity is in accordance with the views that are expressed in the framework. The banks have altered their goals to levels several per cent above the regulations, in contrast to before the crisis when they were often as close as possible. The impact of the new liquidity regulations has been limited, as the banks continue to work with their internal measures. The banks have all changed their view of capital ratio and liquidity, where many of the banks have doubled the amount of these posts and now find these measures to be both beneficial and a way to gain trust and stability.

A culture beyond repair? The nexus between ethics and sanctionsin finance

2017 ◽  
Author(s):  
Jay Cullen
Keyword(s):  
Financial Crisis ◽  
Risk Taking ◽  
Market Discipline ◽  
Excessive Risk Taking ◽  
Excessive Risk

In the wake of the Great Financial Crisis and the attendant collapse of faith in market discipline, there has been a concerted attempt by regulators and state officials to address the perceived ethical deficit in banking. This chapter asks which form of approach has the best chance of success in encouraging bankers to act more responsibly. In particular, it discusses how law and regulation should be used to control socially excessive risk-taking, focusing on two key areas: the character of “excessive” and socially suboptimal risk-taking in finance, which is often obfuscated, and the extent to which individual liability should be used to remedy the consequences of excessive risk-taking. It critical evaluates a variety of other approaches to this problem, focusing in particular on calls for the industry to introduce professional banking codes, which it rejects as based on conceptual misapprehensions.

scholarly journals The impact of executive remuneration on risk-taking in the banking industry

2016 ◽  
Vol 13 (3) ◽  
pp. 110-117 ◽  
Author(s):  
Ezelda Swanepol ◽  
Anet Magdalena Smit
Keyword(s):  
Social Sciences ◽  
Risk Taking ◽  
Banking Industry ◽  
Credit Crisis ◽  
Increased Risk ◽  
Executive Remuneration ◽  
The Impact ◽  
Excessive Risk Taking ◽  
Excessive Risk ◽  
Good Risk

In the aftermath of the credit crisis of 2007-2009, there was considerable public frustration with regard to executive remuneration, particularly in the banking industry. Consequently, the need for regulated remuneration practices became essential. For this purpose, the Prudential Regulation Authority (PRA) aims to align risk and reward by encouraging good risk management and discouraging excessive risk-taking. This paper aims to demonstrate the correlation between the health of the banking industry and economic activity, as well as the change in executive remuneration pre and post the credit crisis. In addition, the paper aims to measure the correlation between executive remuneration in the form of cash and equity, and risk-taking. The unique features of banking emphasized the interconnectedness to the broader economy. The statistical package for social sciences (SPSS) was used to perform these analyses. It was found that as executive remuneration in the form of cash increased, risk-taking decreased. In addition, as executive remuneration in the form of equity decreased, risk-taking increased. In summary, the research points to the fact that executives have in fact been remunerated in terms of equity. However, the results indicate that this may not have enticed the executives to take on more risks

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.

Financial and social efficiency analysis of Islamic microfinance institutions

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Marwa Fersi ◽  
Mouna Bougelbène
Keyword(s):  
Capital Structure ◽  
Credit Risk ◽  
Risk Taking ◽  
Negative Impact ◽  
Microfinance Institutions ◽  
Social Efficiency ◽  
Content Type ◽  
Islamic Microfinance ◽  
The Impact ◽  
The Relationship

PurposeThe purpose of this paper was to investigate the impact of credit risk-taking on financial and social efficiency and examine the relationship between credit risk, capital structure and efficiency in the context of Islamic microfinance institutions (MFIs) compared to their conventional counterparts.Design/methodology/approachThe stochastic frontier approach was used to estimate the financial and social efficiency scores, in a first step. In a second step, the impact of risk-taking on efficiency was evaluated. The authors also took into account the moderating role of capital structure in this effect using the fixed and random effects generalized least squares (GLS) with a first-order autoregressive disturbance. The used dataset covers 326 conventional MFIs and 57 Islamic MFIs in six different regions of the world over the period of 2005–2015.FindingsThe overall average efficiency scores are less than 50%, where CMFIs could have produced their outputs using 48% of their actual inputs. IMFIs record the lowest financial (cost) efficiency that is equal to 28% on average. The estimation results also reveal a negative impact of nonperforming loan on financial and social efficiency. Finally, the moderating effect of leverage funding on the relationship between credit risk-taking and financial efficiency was confirmed in CMFIs. However, leverage seems to moderate the effect of risk-taking behavior on social efficiency for IMFIs.Originality/valueThis paper makes an initial attempt to evaluate the effect of risk-taking decision and its implication on efficiency and MFIs' sustainability. Besides, it takes into consideration the role played by the mode of governance through the ownership structure. In addition, this research study sheds light on the importance of the financial support for the development and sustainability of these institutions, which in return, contributes to a sustainable economic development.

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.

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