Author:
Fersi Marwa,Boujelbène Mouna
Abstract
Purpose
The purpose of this paper is to investigate the impact of loan officers’ overconfidence on risk-taking decision and solvency performance measured by z-scores in the context of Islamic and conventional microfinance institutions (MFIs).
Design/methodology/approach
A random effect generalized least square regression was applied to examine the effect of overconfidence on credit risk-taking. The data set covers 326 conventional MFIs and 57 Islamic MFIs in six different regions over the period of 2005–2015.
Findings
Overconfidence proxies have shown through high loan growth, low-interest margin and loan loss provision reveal negative consequences on risk-exposures for both MFIs averagely. The loan officer’s overconfidence is significantly and positively related to the risk-taking decision, and thus, a lower loan portfolio quality. Besides, loan officers’ risk-taking behaviour harms these institutions’ solvency performance.
Originality/value
This paper makes an initial attempt to evaluate the effect of overconfidence behavioural bias on risk-taking decisions and its implication on the MFIs solvency and sustainability.
Subject
Organizational Behavior and Human Resource Management,Strategy and Management
Reference85 articles.
1. Do women borrowers augment financial performance of MFIs?;Applied Economics,2016
2. The seeds of a crisis: a theory of bank liquidity and risk-taking over the business cycle;Journal of Financial Economics,2012
3. Causes and control of loan default/delinquency in microfinance institutions in Ghana;American International Journal of Contemporary Research,2014
4. Microfinance and gender: is there a glass ceiling on loan size?;World Development,2013
Cited by
5 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