scholarly journals Impact of Fintech on Bank Risk-Taking: Evidence from China

Risks ◽  
2021 ◽  
Vol 9 (5) ◽  
pp. 99
Author(s):  
Liurui Deng ◽  
Yongbin Lv ◽  
Ye Liu ◽  
Yiwen Zhao
Keyword(s):  
Risk Taking ◽  
Instrumental Variable ◽  
Bank Risk ◽  
Consistent Estimation ◽  
Competition Intensity ◽  
Peking University ◽  
Report Data ◽  
Reduction Effect ◽  
Management Capabilities ◽  
The Relationship

This article focuses on the relationship between Fintech and bank risk-taking behavior. Since Robo-Advisor is one of the mature applications of Fintech, we found that the development of Fintech will have a greater impact on small and medium-sized banks through the establishment of a Robo-Advisor model. This paper uses a benchmark regression model to analyze the municipal digital financial inclusion index compiled by Peking University and the annual report data of 155 small and medium-sized banks from 2011 to 2016. We found that the development of Fintech has significantly reduced bank risk-taking level. This result is still valid after the robustness test of replacing the bank’s risk-taking index and replacing the Fintech development index. We used the urban innovation index as an instrumental variable to deal with the endogenous problem, and obtained consistent estimation results. The test of the intermediary effect shows that the development of Fintech will affect the bank risk-taking through channels such as the bank’s internal interest margin, management capabilities, the bank’s external competition intensity, and residents’ saving willingness. Heterogeneity analysis shows the reduction effect of Fintech on bank risk-taking is more pronounced in banks in eastern and western regions in China, the large banks and the urban commercial banks.

scholarly journals CEO power and bank risk in the UAE

2020 ◽  
Vol 15 (3) ◽  
pp. 117-128
Author(s):  
Haileslasie Tadele ◽  
Baliira Kalyebara
Keyword(s):  
Corporate Governance ◽  
Risk Taking ◽  
Global Financial Crisis ◽  
Bank Risk ◽  
Islamic Banks ◽  
Ceo Power ◽  
Governance Mechanisms ◽  
Corporate Governance Mechanisms ◽  
Conventional Banks ◽  
The Relationship

The lessons from the 2008 global financial crisis show that excessive risk taking and governance failures contribute to the failure of several banks. As a result, the relationship between corporate governance mechanisms and risk taking has been the subject of many studies. However, extant studies report inconclusive results. Therefore, this study aims to investigate the relationship between CEO power and bank risk in the UAE using data over the period of 2015–2018 and a sample of 19 UAE banks. The study uses a Pearson pairwise correlation to analyze the relationship between CEO power and bank risk. In addition, a two-tailed t-test is used to examine the differences between conventional and Islamic banks in terms of CEO power and risk-taking. The results of the study show that CEO power measured using CEO duality and CEO tenure reduces risk. Furthermore, the paper indicates that larger boards and higher CEO ownership tend to increase risk. The study also reports that conventional banks have higher return variability, larger boards and powerful CEOs than Islamic banks. However, Islamic banks tend to have higher non-performing finances than conventional banks. The study provides important insights on the relationship between CEO power and bank risk and concurs with earlier studies. The findings can be of interest to policy makers and can be used as input data for the development of corporate governance mechanisms. Shareholders can also use the survey results as input when appointing a CEO for their banks.

Banking regulation and supervision: can it enhance stability in Europe?

2014 ◽  
Vol 6 (3) ◽  
pp. 244-269 ◽  
Author(s):  
Faten Ben Bouheni
Keyword(s):  
Risk Taking ◽  
Generalized Method Of Moments ◽  
Banking Regulation ◽  
European Countries ◽  
Bank Risk ◽  
Dynamic Panel ◽  
Content Type ◽  
Regulation And Supervision ◽  
European Banks ◽  
The Relationship

Purpose – This paper aims to find the effects of regulatory and supervisory policies on bank risk-taking. The same regulation and supervision have different effects on bank risk-taking depending on influence factors. These factors were considered and a sample of the largest European banks from France, Germany, UK, Italy, Spain and Greece was used over the period 2005-2011. Design/methodology/approach – In this paper, the author analyses the effects of regulation and supervision on risk-taking. The author uses a sample of the biggest banks from six European countries (France, UK, Germany, Italy, Spain and Greece) over the period 2005-2011. Because the applicable entry of IFRS was in 2005, thus data of European banks are not available before this date. For each country in the sample, the 10 largest banks (defined by total assets) that lend money to firms were identified. The author does not include central banks or postal banks, which generally do not lend money to firms and are described as non-banking institutions (La Porta et al., 2002). Findings – It was found that restrictions on bank activities, supervisors’ power and capital adequacy decrease risk-taking. Thus, regulation and supervision enhance bank’s stability. While, deposit insurance increases the risk due to its association to moral hazard. Finally, it was found that strengthening regulatory and supervisory framework raises the risk-taking and weakens the stability of European banks. Originality/value – The author contributes to existing empirical analyses in three ways. First, the existing literature has drawn a lot of attention on US banks. However, the purpose of this paper is to examine the biggest banks of three European leaders (France, Germany and UK) and three more European countries influenced by the recent crisis (Spain, Italy and Greece) over the period 2005-2011. Second, most studies focus mainly on the relationship between regulation and profitability, yet seldom on the relationship between regulation, supervision and risk-taking. The author focuses on this relationship. Third, this study applies the two-step dynamic panel data approach suggested by Blundell and Bond (1998) and also uses dynamic panel generalized method of moments (GMM) method to address potential problems. The two-step GMM estimator that the author uses is generally the most efficient.

Does economic freedom matter for risk-taking? Evidence from MENA banks

2016 ◽  
Vol 8 (2) ◽  
pp. 114-136 ◽  
Author(s):  
Saibal Ghosh
Keyword(s):  
Risk Taking ◽  
Instrumental Variable ◽  
Design Methodology ◽  
Economic Freedom ◽  
Bank Risk ◽  
Cross Sectional ◽  
Content Type ◽  
Level Data ◽  
Risk Appetite ◽  
The Impact

Purpose The relevance of economic freedom in influencing bank risk taking has not been adequately addressed in the literature. In this connection, employing bank-level data for 2000-2012, the purpose of this paper is to examine the impact of economic freedom on risk taking by MENA banks. Design/methodology/approach Given the cross-sectional time-series nature of the data, the author employs panel data techniques to explore this issue. In addition, the author examines the robustness of the results using instrumental variable techniques. Findings The findings appear to suggest that economic freedom exerts a significant and non-negligible impact on bank risk taking. Among the sub-components of economic freedom, it is observed that higher levels of both business and monetary freedom increase variability of profits and, thereby, raise the risk appetite of banks. Risk taking by banks appears to be reliably lower after the crisis than in the period prior to it, although there was a substantial increase in bank risk taking during the crisis. Originality/value To the best of the author’s knowledge, this is one of the earliest studies to explore the interlinkage between economic freedom and bank risk taking for MENA banks.

scholarly journals Risk Governance and Performance: Evidence From Eurozone’s Large Banks

2020 ◽  
Vol 11 (5) ◽  
pp. 28
Author(s):  
Paolo Agnese ◽  
Paolo Capuano
Keyword(s):  
Board Of Directors ◽  
Risk Taking ◽  
Econometric Models ◽  
Bank Risk ◽  
Risk Governance ◽  
The Board Of Directors ◽  
Risk Committee ◽  
And Performance ◽  
The Relationship ◽  
Systemically Important Banks

In this paper, by means of econometric models, we investigate the relationship between risk governance and performance of the Eurozone’s Global Systemically Important Banks (G-SIBs), over the period 2014-2018. The results of the quantitative analysis show that the choice to appoint a Chief Risk Officer (CRO) can be useful to shrink the bank risk-taking. Furthermore, we find that the importance attributed by the bank to the CRO – in terms of membership of the board of directors and in terms of remuneration – is positively correlated to both profitability and bank risk-taking. In addition, the analysis shows that the activity carried out by the Risk committee can be helpful to break down the risks.

scholarly journals The Impact of Regulatory Capital and Bank Characteristics on the Relationship between Bank Competition and Risk Taking in the Banking System

2021 ◽  
Vol 28 (1) ◽  
pp. 87
Author(s):  
Eman Abdel-Wanis
Keyword(s):  
Risk Taking ◽  
Negative Impact ◽  
Positive Impact ◽  
Banking System ◽  
Bank Risk ◽  
Bank Competition ◽  
Regulatory Capital ◽  
The Impact ◽  
The Relationship ◽  
Positive Effect

This paper explores the association between bank competition, regulatory capital, and bank risk taking in an Egyptian setting and to examine the interaction between bank competition and regulatory capital and their impact on bank risk taking in developing countries like Egypt and also investigate the effect of bank characteristics on the relationship between bank competition and bank risk taking through a sample of 27 Egyptian listed banks during the period 2012-2018 using OLS regression . Results indicated that there is a negative impact of bank competition on the bank risk taking and a positive effect of regulatory capital on bank risk taking in the Egyptian listed banks. Results show that increase regulatory play a vertical role in enhance association between competition and bank risk taking and also, there is a positive impact of bank characteristics like: bank size and divarication on bank risk taking in the Egyptian banks. Results refer to there is no effect of bank type, leverage and profitability to support the relationship between bank competition and risk taking

scholarly journals Opacidade e Assunção de Risco pelos Bancos

2012 ◽  
Vol 10 (4) ◽  
pp. 499
Author(s):  
Patrick Behr
Keyword(s):  
Financial Institutions ◽  
Risk Taking ◽  
Bank Risk ◽  
Z Score ◽  
Common View ◽  
Suggestive Evidence ◽  
The Common ◽  
The Relationship

This paper investigates the relationship between opaqueness and bank risk taking. Using a sample of 199 banks from 38 countries over the period January 1996 to December 2006, I analyze whether more opaque banks are riskier than less opaque banks. I find suggestive evidence that commonly used proxies for bank opaqueness are significantly related to bank risk taking as measured by the Merton PD and the bank-individual Z-score, even after accounting for potential simultaneity between risk taking and opaqueness. More opaque banks seem to engage more in risk taking than less opaque banks. This result provides support to the common view that bank opaqueness is problematic and that transparency among financial institutions should be increased.

scholarly journals Ownership concentration and bank risk (A study on banking sectors in Indonesia)

2015 ◽  
Vol 18 (2) ◽  
pp. 189 ◽  
Author(s):  
Etikah Karyani ◽  
Sidharta Utama
Keyword(s):  
Ownership Structure ◽  
Risk Taking ◽  
Regulatory Compliance ◽  
Ownership Concentration ◽  
Bank Risk ◽  
Management Decision ◽  
Basel Accord ◽  
Using Data ◽  
Policy Guidance ◽  
The Relationship

The purpose of this study is to test empirically the relationship between ownership concentration and risk taking by banks which are proxied by the CAR and LDR (li-quidity ratio). The study was motivated by the limited previous studies that analyze the structure of ownership in financial institutions and the weaknesses in sampling. Our analysis focused on Indonesia because this country has implemented the Basel Accord II standards successfully. This regulatory compliance is expected can control banking risk. Using data from 2009 until 2013 and panel data. We found that the ownership concentration become important determinants of bank liquidity. These findings are expected to provide policy guidance for regulators, especially relating to the ownership structure of the bank. However, the ownership concentration proved to be involved in the management decision to risk taking in banks.

scholarly journals Market Concentration, Capital and Risk Taking in Banking Industry

2021 ◽  
Vol 14 (1) ◽  
pp. 69
Author(s):  
Erika Sefila Putri ◽  
Rahmat Setiawan
Keyword(s):  
Risk Taking ◽  
Commercial Banks ◽  
Banking Industry ◽  
Banking System ◽  
Market Concentration ◽  
Bank Risk ◽  
Bank Capital ◽  
Banking Market ◽  
The Relationship ◽  
Positive Effect

Banking market concentration is an interesting banking topic to study because the banking market structure plays an important role in a country's banking system. This study aims to determine the relationship between banking market concentration and bank risk taking, and bank capital as a moderating variable on the relationship between bank capital and bank risk taking. The test was conducted using multiple linear regression on 104 conventional commercial banks in Indonesia from 2007 to 2016. The results of this study indicate that banking market concentration has a positive effect on bank risk-taking, and bank capital weakens the positive effect of bank market concentration on bank risk-taking.

scholarly journals Capital Regulation and Risk-taking Behavior: Empirical Evidence for Islamic Banks

2022 ◽  
Vol 12 (1) ◽  
pp. 43-50
Author(s):  
Yomna Daoud ◽  
Aida Kammoun
Keyword(s):  
Empirical Evidence ◽  
Risk Taking ◽  
Banking Sector ◽  
Theoretical Background ◽  
Capital Adequacy ◽  
Bank Risk ◽  
Capital Regulation ◽  
Islamic Banks ◽  
Conventional Banks ◽  
The Relationship

This paper investigates whether regulatory pressures have an impact on the relationship between change in capital and bank risk-taking. On the basis of a well developed theoretical background, capital regulation constitutes the core of prudential regulation within the banking sector. Several researches have investigated this relationship between capital and risk in conventional banks, and this subject has gained in interest since the last financial crisis. This study is one of the few studies that have attempted to provide empirical evidence on this issue for Islamic banks. We use data of Islamic banking sectors over the period 2010–2014. The results reveal that Islamic banks tend to behave differently at each level of capital adequacy. In addition, we provide some evidence that change in capital is positively related to the change in risk for highly capitalized Islamic banks.

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