The Impact of Foreign Ownership on Corporate Risk Taking Behavior

2017 ◽  
Author(s):  
Dewi Asri Rosalina ◽  
Feri Rustandi ◽  
Amir Machmud ◽  
Ikaputera Waspada
Keyword(s):  
Risk Taking ◽  
Foreign Ownership ◽  
Risk Taking Behavior ◽  
Corporate Risk ◽  
The Impact

scholarly journals State Ownership and Risk-Taking Behavior: An Empirical Approach to Get Better Profitability, Investment, and Trading Strategies for Listed Corporates in Vietnam

Economies ◽  
2020 ◽  
Vol 8 (2) ◽  
pp. 46
Author(s):  
Tran Thai Ha Nguyen ◽  
Massoud Moslehpour ◽  
Thi Thuy Van Vo ◽  
Wing-Keung Wong
Keyword(s):  
Risk Taking ◽  
Dominant Role ◽  
Generalized Method Of Moments ◽  
Trading Strategy ◽  
State Ownership ◽  
Trading Strategies ◽  
Risk Appetite ◽  
Risk Taking Behavior ◽  
Corporate Risk ◽  
The Impact

Corporate risk-taking behavior and investment is a crucial factor in order to seek higher profits and a better trading strategy. Competitive advantage and innovation, while maintaining profitability and state ownership, are considered as crucial resources. Furthermore, it is essential to connect the short-term and long-term business and investment objectives plus stakeholder’s expectations to corporate sustainability and development. This connection is especially important in the context of transforming economies and getting better trading strategies. This study estimates the relationship between state ownership, profitability, corporate risk-taking behavior, and investment in Vietnam by using Generalized Method of Moments (GMM) methods. Using the data of 501 listed non-financial corporates during the period 2007–2015 from Ho Chi Minh City and Hanoi Stock Exchanges, we find that profitability is determined as a factor to reduce corporate risk-taking acceptance caused by the chances of entrenchment. Meanwhile, the impact of state ownership on the risk appetite of corporate has a non-linear effect. In particular, state ownership reduces corporate risk-taking behavior and investment but yet increases the risk-taking behavior and investment when the state ownership rate exceeds a threshold. One the one hand, this implies that the low level of state ownership not only prevents risk-taking behavior and investment but also results in more severe agency problems, causing unsustainability due to the imbalance of interests among various stakeholders. On the other hand, a dominant role of state ownership concentration causes a boost in corporate risk-taking decision-making in investment and trading strategy, leveraging the connection of significant external resources to deal with uncertain problems. The study contributes to existing theories of corporate governance in the context of a socialist-oriented market.

scholarly journals Do foreign and state banks take more risk?

2018 ◽  
Vol 13 (4) ◽  
pp. 96-102
Author(s):  
Fitri Ismiyanti ◽  
Afwadi Rahman ◽  
Putu Anom Mahadwartha
Keyword(s):  
Risk Taking ◽  
Foreign Ownership ◽  
Bank Risk ◽  
Z Score ◽  
Government Ownership ◽  
Increase Risk ◽  
Risk Taking Behavior ◽  
Barrier To Entry ◽  
Low Efficiency ◽  
The Impact

This paper addresses the impact of foreign ownership, government ownership, efficiency and income diversification on the risk-taking behavior of banks in Indonesia. This research uses Z-Score to measure bank risk-taking behavior. Z-score proxies probability bank’s loss that is greater than its equity. Despite their profit, bank may suffer financial insolvency when taking too much risk. This study used a sample of 44 banks in Indonesia over the 2011–2016 period with purposive sampling method. Based on the result of the research, it can be concluded that foreign ownership can increase bank risk-taking behavior due to the barrier to entry in the form of deficiency of quality information of the borrower so that it has an impact on the increase of non-performing loan ratio. While government ownership can also increase risk-taking behavior, because banks are used by politicians to pursue political goals that cause banks to take high-risk projects with low profits. In addition, the results of this study also show that banks with low efficiency tend to increase the risk-taking behavior.

The impact of bank liquidity risk on risk-taking and bank lending: evidence from European bank

2021 ◽  
Vol 6 (2) ◽  
pp. 82-97
Author(s):  
Hongyan Liang ◽  
Zilong Liu
Keyword(s):  
Growth Rate ◽  
Risk Taking ◽  
Fixed Effects ◽  
Liquidity Risk ◽  
Bank Lending ◽  
Basel Iii ◽  
European Banks ◽  
Risk Taking Behavior ◽  
Loan Growth ◽  
The Impact

Objective – This paper uses a sample of annual observations of European banks to examine whether the liquidity risk affects a bank’s risk-taking behavior and its future loan growth. Methodology – A sample of European banks (27 member countries of the European Union plus U.K.) over the period of 2005 to 2019 are used in this study. Liquidity risk is measured by the ratio of liquid assets to total assets. Given the longitudinal nature of the data, the authors use panel regression with bank fixed effects to control for unobserved characteristics that might affect the dependent variable. Findings – The authors find that banks holding more liquid assets take less risk and show a higher subsequent loan growth rate. These results hold for both small and large banks. Novelty – To the authors’ best knowledge, this is one of the earliest studies to carefully examine the effects of liquidity risk on risk-taking behavior and loan growth rate for European banks. Our research suggests that the current Basel III requirement on liquidity ratio can decrease bank’s risking-taking behavior while not necessarily impact their future loan growth. Type of Paper: Empirical JEL Classification: G21, G01, G18. Keywords: Bank Liquidity Risk; Risk-taking Behavior; Loan Growth; Basel III

Capital regulation, competition and risk-taking behavior of Indian banks in a simultaneous approach

2018 ◽  
Vol 44 (4) ◽  
pp. 459-477 ◽  
Author(s):  
Santi Gopal Maji ◽  
Preeti Hazarika
Keyword(s):  
Human Capital ◽  
Risk Taking ◽  
Value Added ◽  
Capital Adequacy ◽  
Bank Risk ◽  
Capital Regulation ◽  
Content Type ◽  
Risk Taking Behavior ◽  
Indian Banks ◽  
The Impact

Purpose The purpose of this paper is to investigate the association between capital regulation and risk-taking behavior of Indian banks after incorporating the influence of competition. Further, the study intends to enrich the existing literature by providing empirical evidence on the role of human resources in managing risk along with the influence of other bank specific and macroeconomic variables. Design/methodology/approach Secondary data on 39 listed Indian commercial banks are collected from “Capitaline Plus” corporate data database for a period of 15 years. Capital is measured by capital adequacy ratio as defined by the regulators, and two definitions of risk – credit risk and insolvency risk – are employed. Competition is measured by Herfindahl-Hirschman deposits index, concentration ratio and H-statistic. The value-added intellectual coefficient model is employed to compute human capital efficiency (HCE). Three-stage least squares technique in a simultaneous equation framework is used to estimate the coefficients. Findings The study finds that absolute level of regulatory capital and bank risk are positively associated, although the influence of capital on risk is not statistically significant. The influence of competition on risk is negative for all the models, which supports the “competition stability” view. The impact of human capital on bank risk is also negative for all cases. Practical implications The findings of the study are useful for the decision makers in several ways based on the inverse influence of competition and HCE on bank risk. Further, the observed positive association between capital and risk indicates that the capital regulation is not sufficient to enhance the stability in the banking sector. Originality/value This is the first study in the Indian context that incorporates the competition in the banking industry as an explanatory variable in the extant bank capital and risk relationship.

Corporate risk taking and sustainability: a case of listed firms from USA and Germany

2019 ◽  
Vol 10 (1) ◽  
pp. 2-15 ◽  
Author(s):  
Zahid Irhsad Younas ◽  
Ameena Zafar
Keyword(s):  
Risk Taking ◽  
Profit Maximization ◽  
Well Being ◽  
Least Square ◽  
Board Structure ◽  
Best Interest ◽  
Content Type ◽  
Listed Firms ◽  
Corporate Risk ◽  
The Impact

PurposeThis study aims to analyze the impact of corporate risk taking on the sustainability of firms in USA and Germany. As risk taking is an expensive phenomenon, the firm may shift the resources from stakeholder well-being to profit maximization of shareholders. Ultimately, risk taking results in the reduction of firm’s sustainability.Design/methodology/approachTo capture the impact of corporate risk taking, the corporate-governance variables, i.e. “independent board structure” and “board size,” were used as instrumental variables to control excessive corporate risk taking and restrict it at a healthy level. A sample of 3,387 unbalanced panel observations from USA and Germany, for the period 2004-2015, were assessed.FindingsThe results confirm that corporate risk taking has a negative and significant impact on the sustainability of firms.Research limitations/implicationsGovernment and policymakers in USA and Germany may introduce regulations to curb excessive corporate risk taking for sustainable corporations and sustainable society. This research suggests that corporate risk taking is not in the best interest of stakeholders.Originality/valuePrevious literature only finds the impact of sustainability on corporate risk taking and there is not a single study that examines the impact of corporate risk taking on the sustainability of a firm. Thus, this study contributes to existing literature on corporate risk taking and sustainability. The study further contributes by using the instrumental variable two stage least square.

Assessing the impact of risk-taking behavior on road crash involvement among University students residing in two Mediterranean countries

2011 ◽  
Vol 49 (6) ◽  
pp. 933-938 ◽  
Author(s):  
Constantine N. Antonopoulos ◽  
Evi Germeni ◽  
Flora Bacopoulou ◽  
Vassiliki Kalampoki ◽  
Stefanos Maltezos ◽  
...  
Keyword(s):  
University Students ◽  
Risk Taking ◽  
Mediterranean Countries ◽  
Road Crash ◽  
Risk Taking Behavior ◽  
The Impact

scholarly journals Capital Flows and Bank Risk-Taking Behavior: Evidence From Indonesia

2020 ◽  
Vol 9 (s1) ◽  
pp. 33-53
Author(s):  
Bayront Yudit Rumondor ◽  
Pakasa Bary
Keyword(s):  
Risk Taking ◽  
Capital Flows ◽  
Emerging Market ◽  
Capital Inflows ◽  
Bank Risk ◽  
Portfolio Investment ◽  
Industry Level ◽  
Country Level ◽  
Risk Taking Behavior ◽  
The Impact

AbstractThis paper investigates the impact of capital flows on bank risk-taking behavior. It undertakes two levels of empirical estimations, namely (i) single-country industry-level; and (ii) multi-country industry-level estimations, covering emerging market economies. The results suggest that capital inflows, in the form of portfolio investment, is significant in raising risk-taking behavior. Large banks are less aggressive in their risk-taking behavior vis-à-vis smaller banks. Such impact of portfolio investment on risk-taking behavior is also shown in the multi-country level estimates.

scholarly journals The Effect of Executive Compensation on Credit Default Swap Spread

2019 ◽  
Vol 21 (1) ◽  
pp. 19
Author(s):  
Meizaroh Meizaroh ◽  
Masripah Masripah
Keyword(s):  
Executive Compensation ◽  
Risk Taking ◽  
Time Series Data ◽  
Credit Default Swap ◽  
Best Interests ◽  
Series Data ◽  
Credit Default ◽  
Default Swap ◽  
Risk Taking Behavior ◽  
The Impact

Investors have been trying to formulate the optimum composition of executives’ compensation which will incentivize the executives to perform better and act in the shareholders’ best interests. This study aims to find empirical evidence about the impact of executive compensation on the default risk with the Credit Default Swap (CDS) spread as the proxy, using panel data to test the research model, which combines the analysis of cross-section and time series data. The study is conducted based on 1,416 observations of 177 U.S. companies from 2008-2015. The data are mainly collected from Datastream, Compustat, CRSP, and the US SEC’s EDGAR database. The current study provides a contribution by suggesting that executives’ compensation will trigger risk-taking behavior. The results of this study reveal, firstly, both equity-based compensation and debt-like compensation induce risk-taking behavior by the executives. Secondly, the correlation between both the form of the compensation and the CDS spread is weakened in a high information asymmetry environment. Lastly, this study finds that a CFO’s compensation has more influence on the CDS spread, compared to the other board executives, but this condition only occurs when the compensation is awarded in the form of debt-like compensation. To improve the generalization of the results, a further study may consider expanding the sample into several countries.

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