scholarly journals Bank Diversification, Market Structure and Bank Risk Taking: Theory and Evidence from U.S. Commercial Banks

2012 ◽  
Author(s):  
Martin Richard Goetz
Keyword(s):  
Market Structure ◽  
Risk Taking ◽  
Commercial Banks ◽  
Bank 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.

Capital regulation and ownership structure on bank risk

2019 ◽  
Vol 28 (1) ◽  
pp. 39-56 ◽  
Author(s):  
Aysa Siddika ◽  
Razali Haron
Keyword(s):  
Maximum Likelihood ◽  
Ownership Structure ◽  
Risk Taking ◽  
Commercial Banks ◽  
Dynamic Panel Data ◽  
Bank Risk ◽  
Capital Regulation ◽  
Content Type ◽  
Global Banking ◽  
The Impact

Purpose This paper aims to examine the impact of capital regulation, ownership structure and the degree of ownership concentration on the risk of commercial banks. Design/methodology/approach This study uses a sample of 565 commercial banks from 52 countries over the period of 2011-2015. A dynamic panel data model estimation using the maximum likelihood with structural equation modelling (SEM) was followed considering the panel nature of this study. Findings The study found that the increase of capital ratio decreases bank risk and the regulatory pressure increases the risk-taking of the bank. No statistically significant relationship between banks’ ownership structure and risk-taking was found. The concentration of ownership was found negatively associated with bank risk. Finally, the study found that in the long term, bank increases the capital level that decreases the default risk. Originality/value This study presents an empirical analysis on the global banking system focusing on the Basel Committee member and non-member countries that reflect the implementation of Basel II and Basel III. Therefore, it helps fill the gap in the banking literature on the effect of recent changes in the capital regulation on bank risk. Maximum likelihood with SEM addresses the issue of endogeneity, efficiency and time-invariant variables. Moreover, this study measures the risk by different proxy variables that address total, default and liquidity risks of the banks. Examining from a different perspective of risk makes the study more robust.

Effect of monetary policy on bank risk: does market structure matter?

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Muntazir Hussain ◽  
Usman Bashir ◽  
Ahmad Raza Bilal
Keyword(s):  
Monetary Policy ◽  
Market Structure ◽  
Risk Taking ◽  
Bank Risk ◽  
Monetary Policy Transmission ◽  
Content Type ◽  
Bank Of China ◽  
Policy Transmission ◽  
Chinese Banking Industry

PurposeThe purpose of this paper is to investigate the risk-taking channel of monetary policy transmission in the Chinese banking industry. This study also investigates the role of various other factors in the risk-taking channel.Design/methodology/approachThis study used panel data from 2000 to 2012, and a dynamic panel model (Difference GMM) was applied.FindingsThe empirical findings of this paper suggest that loose monetary policy rates increase bank risk-taking. Unlike previous studies, the results of this paper suggest that the bank-specific factors (size, liquidity and capitalization) do not significantly affect the risk-taking channel. However, the market structure does have a stabilizing effect on monetary policy transmission and the risk-taking channel. Higher market power weakens the risk-taking channel of monetary policy transmission.Practical implicationsOf significance to the policymakers' point of view is that loose monetary policy induces banks to take excessive risks. However, such effects can be mitigated by encouraging a proper level of market power in banking markets.Originality/valueThis study investigated the risk-taking channel of monetary policy transmission for the Chinese banking industry. Due to the unique features of the People's Bank of China (PBC, Central Bank of China) policy, this study also contributes to the literature by comparing price-based and quantity-based monetary policy tools and their effectiveness in financial stability and monetary policy transmission. Furthermore, the role of market structure is also investigated in the risk-taking channel.

scholarly journals Monetary policy and bank risk-taking in sub-Sahara Africa

2021 ◽  
Vol 18 (1) ◽  
pp. 15-38
Author(s):  
Gabriel Aboyadana
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
North America ◽  
Risk Taking ◽  
Commercial Banks ◽  
Bank Risk ◽  
Limited Attention ◽  
Monetary Authorities ◽  
Different Types ◽  
Policy Impacts

Monetary policy has been shown to influence the risk-taking behaviour of banks in Europe and North America. Africa has however received limited attention in this regard. This study contributes to the monetary policy and bank risk-taking literature for sub-Sahara Africa by examining a panel of commercial banks from 2001-2015 for different types of risks. We find that monetary policy significantly influences bank risk-taking both statistically and economically, but the effect differs across the types of risks. Bank size and profitability are important in determining how effective monetary policy impacts risk-taking. The effects are stronger for countries without exchange rate controls. In terms of policies, monetary authorities intending to pursue expansionary monetary policy must remedy the risk-taking response by banks.

scholarly journals The Impact of Cross-Border Capital Flows on the Chinese Banking System

SAGE Open ◽  
2021 ◽  
Vol 11 (2) ◽  
pp. 215824402110214
Author(s):  
Yang Zhao ◽  
Zichun Xu
Keyword(s):  
Risk Taking ◽  
Capital Flows ◽  
Commercial Banks ◽  
Generalized Method Of Moments ◽  
Bank Risk ◽  
Capital Account ◽  
Political Condition ◽  
Positive Effects ◽  
Cross Border ◽  
The Impact

With the accelerated opening of China’s capital account, China’s banking sector is exposed to the impacts of cross-border capital flows. This article explores the impact of cross-border capital flows on banks’ risk-taking in China. Employing bank-level data of 50 Chinese commercial banks from 2005 to 2018 and a sys-GMM (system generalized method of moments) estimation method, we show that cross-border capital flows are positively associated with the risk-taking of Chinese commercial banks. Moreover, banks that are larger, more capital adequate, and more profitable are more sensitive to the degree of capital account openness toward risk-taking, and the capital account openness has the greatest influence on the profitability-driven bank risk-taking. Nevertheless, such positive effects of capital account openness on bank risk-taking may be weakened under bad macro-environment, indicated by low economic growth, poor legitimate law enforcement, and unstable political condition.

Sign in / Sign up

Export Citation Format

Share Document