Search results

Purpose – This paper examines the interaction of efficiency and bank risk taking in the Ghanaian banking industry.

Design/methodology/approach – We relate risk taking to price competitiveness, foreign ownership and cost efficiency and other control variables. Cost-inefficiency scores from a stochastic frontier model are used, and a Lerner price index is employed to proxy for market power.

Findings – Our results suggest that market power affects risk taking when conditioned on foreign ownership, but foreign bank risk-taking behaviour is not statistically different from local banks. Cost inefficiency diminishes bank soundness. We also find that industry concentration discourages greater risk taking.

Originality/value – Our study extends the views on risk taking and competition among banks in Ghana, which throws more light from an emerging economy perspective.

The paper aims to gain an insight into behavioural characteristics of Islamic banks and how they influence the risk‐taking decisions of Islamic banks in financial markets within the prospect theory context.

The study employs review and application of prospect theory in Islamic banking industry across the globe, making use of 99 Islamic banks across 14 countries.

Empirical evidence shows that Islamic banks located above target risk level tend to show risk‐adverse behaviour, while banks below target risk level inclined towards risk‐seeking attitude. Results also highlighted that banks which have higher loans to total asset ratio tend to take on lower risk.

Islamic bank regulators will be better prepared to monitor the Islamic banking system if they understand risk‐taking behaviour of Islamic bank managers. The findings will provide more effective bank regulatory oversight, thus preventing Islamic bank failures in future.

Since there are relatively few studies conducted in risk‐taking behaviour of Islamic banks, specifically global Islamic banking, this study will broaden the scope of the literature by providing novel empirical evidence on risk‐taking practice of Islamic banks worldwide.

Motivated by recent financial liberalization policies in emerging markets, this study investigates whether bank competition and regulatory capital affect bank risk taking in an international banking context.

Bank competition is regressed, using GLS regression, on various measures of bank risk, to reflect regulatory, accounting and market-based risk-taking. The authors use a sample of publicly traded banks operating in Africa during 2004–2019.

Results show that higher level of bank competition increases bank risk taking and results in greater financial fragility in the absence of banking capital regulations. Furthermore, larger capital adequacy ratios control the risk-taking incentives of managers and guard banks against the risk of default. Further tests confirm the significance of market-based risk measures over accounting and regulatory measures.

Findings are relevant to bank managers and regulators in their sustained effort of finding an optimal balance between bank competition and financial stability. Increased competition should be balanced with capital regulations to curtail bank excessive risky behavior and derive the social benefits of greater competition in the market while sustaining overall economic growth.

This study provides novel evidence in an international context. First, it uses regulatory, accounting and market-based measures of bank risk taking to reflect regulators', management and market participants' emphasis. Another original contribution is the investigation of bank competition across African economies characterized by financial liberalization, stringent banking system and interesting socio-economic challenges.

This study aims to investigate the relationship between audit committee (AC) attributes and the risk-taking behavior of Islamic banks.

The study used data generated from the annual reports of 43 full-fledged Islamic banks operating in 15 countries between 2010 and 2020.

The findings indicate that AC size, AC independence and the proportion of AC members from foreign countries have a significant negative relationship with the risk-taking of Islamic banks. However, AC meetings, AC gender diversity and the proportion of AC members with doctorate degrees have insignificantly influenced the risk-taking of Islamic banks.

The study used only six AC attributes out of corporate governance mechanisms likely to affect the insolvency risk of full-fledged Islamic banks between 2010 and 2020.

The study sheds light on the effects of AC attributes on the risk-taking of Islamic banks. The findings could allow policymakers and regulators to provide policies and regulations that could improve AC’s oversight role in constraining Islamic banks from excessive risk-taking. Besides, this study can guide the board of directors in appointing AC members who can prevent Islamic banks from taking excessive risks.

This study provides clear and adequate empirical evidence showing how key audit committee attributes influence the risk-taking behavior of full-fledged Islamic banks.

The global financial crisis of 2008 has put greater doubt on the bank risk-management effectiveness around the world. As a part of the response to such doubt, the Gulf Cooperation Council (GCC) region is formulating some feasible approaches to manage bank risk. In this regard, an understanding of the role of the region’s culture and economic freedom will provide immense input into this risk management approach. This study examines the impact of national culture and economic freedom on bank risk-taking behavior.

Data on bank risk measures, culture and economic freedom are obtained from the FitchConnect, World Bank database, Hofstede’s insights and Heritage Foundation. Generalized least squares and two step-system generalized method of moments are then used to examine the risk-taking behavior of the region.

Banks of the GCC region operating in the low power distance, high collectivism, masculine and low uncertainty avoidance cultures are susceptible to assuming more operational and insolvency risks. Furthermore, banks’ overall risk-taking inclination is positively increased once the region has considerable business and monetary freedom.

The governments and bank regulatory bodies may benefit from the study findings by developing the best economic freedom index and national culture that enriches risk management practices and curves excessive risk-taking inclination.

To the best of the authors’ knowledge, this study is the first attempt to address the interplay among culture, economic freedom and bank risk to ensure constructive risk-taking behavior for the GCC banking industry.

This paper aims to examine the relationship between gender diversity and the risk profile of 141 listed banks from 14 emerging countries over the period of 2012–2020. Specifically, this study investigates whether the relationship between gender diversity and banking risk varies between Islamic banks and conventional banks, both before and during the COVID-19 pandemic. The second aim is to investigate whether COVID-19 health crisis moderates the effect of gender diversity on banks’ risk-taking behavior within a dual banking system.

This study derives its theoretical foundation from both the token theory and the critical mass theory. Both fixed and random effects are combined to examine the relationship between gender diversity and bank risk-taking in emerging countries.

The results show that female presence on the board of directors reduces banks' financial risk. However, the presence of women continues to positively affect the capital adequacy ratio of large banks. The results also show that the presence of at least two female directors significantly reduces banking risk. The findings support the expectations of the token and critical mass theories. In addition, the presence of female board members, per se, does not influence the risk-taking behavior of Islamic banks. Finally, this study demonstrates that the moderating role of the COVID-19 health crisis is only more effective for large banks than for small ones. The analyses demonstrate good reliability and robustness of the findings of this study.

The study provides novel insights for policymakers and practitioners on how female directors impact banks’ risk-taking behavior in dual-banking countries. It also contributes to the debate on gender diversity and corporate governance literature, which can help in monitoring bank risk-taking and improving financial stability.

This study presents new evidence about the importance of board gender diversity for bank risk-taking in a dual banking system by considering the moderating influence of the COVID-19 pandemic. This study also contributes to the literature on bank risk-taking by applying two measures of gender diversity and a critical mass of women on boards.

The purpose of this paper is to examine whether board characteristics moderate the relationship between capital adequacy regulation and bank risk-taking of universal banks in Sub-Saharan Africa (SSA).

The paper uses 700 bank-year observations of universal banks in SSA between 2009 and 2019. The paper further uses the two-step generalized method of moments as the baseline estimator.

The paper finds that capital adequacy regulation is positively related to overall bank and liquidity risks. Nonetheless, capital adequacy regulation increases credit risk in the sampled banks. The paper further reports that board characteristics individually and significantly moderate the relationship between capital adequacy regulation and risk-taking.

The findings have implications for regulators of universal banks that board characteristics matter for capital adequacy regulation to impact risk-taking behavior.

The paper extends the existing literature on the effect of board characteristics on the capital adequacy regulations and risk-taking behavior nexus of universal banks.

This paper aims to investigate whether loan officers' risk taking in credit decisions are associated with their personal financial risk preference and personality traits or solely with bank-contextual and loan-relevant factors.

An online survey administered in six large Swedish banks to 163 loan officers responsible for assessing credit risk and approval of loan applications. The loan officers rated their likelihood of approving fictitious loan applications from business companies.

The loan officers' credit risk taking is associated with bank-contextual factors, directly with perceived organizational credit risk norms and indirectly with self-confidence in assessing credit risks through attitude to credit risk taking. A direct association is also found with personal financial risk preference but not with personality traits.

Increased awareness of that loan officers' personal financial risk preference is associated with their credit risk taking in loan decisions but that the banks' risk policy has a stronger association. Banks' managements and boards should therefore assure that their credit risk policy is implemented, followed and being aligned with their performance incentives.

Increased awareness of that loan officers' credit risk taking is associated with personal financial risk preference but more strongly with the banks' risk policy that motivate banks' managements and boards to assure that their credit risk policy is implemented, followed and being aligned with their performance incentives.

The first study which directly compare the associations of loan officers' risk taking in credit approvals with personal risk preference and personality traits versus bank-contextual factors and loan-relevant information.

This study aims to examine the relationship between corporate governance, including board gender diversity and bank risk-taking behaviour in Ghana.

This research uses panel corrected standard errors estimation on 26 selected banks over an 11-year period from 2006 to 2016.

Using three proxies for bank risk-taking and two proxies for gender diversity for the purposes of checking robustness, this study finds ample evidence to support the important influence of corporate governance and board gender diversity on bank risk-taking behaviour. The findings suggest that independence, gender diversity, size and leadership consolidation can have significant effects on the risk profile of banking firms. The initial finding of the study suggests the possibility that female board gender diversity on Ghanaian banking boards follows the tokenism theory. Subsequent estimations seem to provide evidence to suggest that attaining a critical mass of female board members imposes a significant control on risk-taking behaviour by banks.

This study has important implications for gender diversity in board construction within the banking sector and the discourse on bank risk-taking in an emerging market context.

The primary aim of this study is to evaluate the impacts of institutional quality (IQ) and economic policy uncertainty (EPU) on bank risk-taking behavior, especially after the global financial crisis of 2007–2008.

After considering the outlier effect, missing figure and inconsistent data, the study’s final sample contains 24,364 firm-year observations of 4,367 banks. A total of 27 countries were considered as those data are available on the “EPU index” introduced by Baker et al. (2016) for 2011–2020. To estimate the core results, the dynamic panel generalized method of moments (GMM) has been used to examine the effects of IQ and EPU on bank risk-taking behavior. Later, this study also validates the core results by using two-stage least squares (2SLS).

The authors found a positive relationship between EPU and banks' risk-taking behavior of banks', but imperatively, a significant and negative relationship exists between IQ and bank risk-taking behavior. This study also has a remarkable and distinct findings from Uddin et al. (2020) one of the vital indicators of IQ quality measurement “voice and accountability” (VACC) impacted negatively on bank risk-taking behavior. It indicates that when VACC is well established, banks tend to take the low risk under the prevailing EPU conditions and vice-versa. Moreover, the lagged dependent variable significantly impacted the bank's risk-taking negatively.

To the best of the authors' knowledge, very few studies endeavored to investigate the dominance or impact level of IQ and EPU on the area, i.e. bank risk-taking behavior which inspired us to contribute to the banking literature to address this issue in a broader aspect – the connection between EPU and bank risk-taking behavior, also a relationship between IQ and bank risk-taking behavior and finally linking them with bank risk-taking behavior.