Abstract
PurposeThe 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.Design/methodology/approachAfter 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).FindingsThe 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.Originality/valueTo 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.
Subject
Computer Science (miscellaneous),Social Sciences (miscellaneous),Theoretical Computer Science,Control and Systems Engineering,Engineering (miscellaneous)
Reference87 articles.
1. The interactional relationships between credit risk, liquidity risk and bank profitability in MENA region;Global Business Review,2022
2. Economic uncertainty and corruption: evidence from public and private firms;Journal of Financial Stability,2021
3. Political risk and bank stability in the Middle East and North Africa region;Pacific-Basin Finance Journal,2020
4. Economic policy uncertainty: a literature review;The Journal of Economic Asymmetries,2019
5. Alessandri, P. and Bottero, M. (2017), “Bank lending in uncertain times”, Working Paper, Bank of Italy.
Cited by
2 articles.
订阅此论文施引文献
订阅此论文施引文献,注册后可以免费订阅5篇论文的施引文献,订阅后可以查看论文全部施引文献