Financial liberalization and bank risk-taking: International evidence

Cubillas, Elena; González, Francisco

doi:10.1016/j.jfs.2013.11.001

Cited by 152 publications

(89 citation statements)

References 51 publications

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“…This result suggests that higher competition in deposits and credit markets caused by the higher financial openness increases bank risk-taking. The positive association between financial openness and bank risk-taking is consistent with the findings of recent studies (Bourgain et al 2012;Cubillas and González 2014). The Financial Crisis dummy variable is positive with a significant coefficient, indicating that the bank income volatility and the probability of default increase in crisis periods.…”

Section: Openness and Bank Risk-takingsupporting

confidence: 90%

“…Another aspect of openness is financial openness, which can affect bank risk-taking significantly (Bourgain et al 2012;Cubillas and González 2014). We use the Kaopen index developed by Ito (2006, 2008) to control for the level of financial openness of the sample countries.…”

Section: Methodology and Variablesmentioning

confidence: 99%

“…In this context, recent studies have examined the impact of financial openness on bank risk-taking behavior at the micro-level and find that higher financial openness increases bank risk-taking (Bourgain et al 2012;Cubillas and González 2014). However, the studies that examine the impact of trade openness on bank risk-taking behavior are scarce.…”

Section: Introductionmentioning

confidence: 99%

“…The extant literature has focused on the structure of the banking industry (Boyd and Nicolo 2005;Martinez-Miera and Repullo 2010), banking regulations Haq et al 2014;Haq and RichardHeaney 2012;Rahman et al 2015), macroeconomic indicators such as GDP per capita, GDP growth, and inflation (Ali and Daly 2010;Bouvatier et al 2014;Castro 2013;Chaibi and Ftiti 2015;Festić et al 2011), the level of financial development (Vithessonthi 2014), legal institutions (Cole and Turk 2013;Houston et al 2010), financial openness (Bourgain et al 2012;Cubillas and González 2014), national culture , and political institutions ) as significant determinants of cross-country variation in bank risk-taking. We analyze the impact of trade openness on bank risk-taking behavior and add to this literature.…”

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

Trade Openness and Bank Risk-Taking Behavior: Evidence from Emerging Economies

Ashraf

Arshad

Liang

2017

JRFM

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Abstract:In this paper, we examine the impact of trade openness on bank risk-taking behavior. Using a panel dataset of 291 banks from 37 emerging countries over the period from 1998 to 2012, we find that higher trade openness decreases bank risk-taking. The results are robust when we use alternative bank risk-taking proxies and alternative estimation methods. We argue that trade openness provides diversification opportunities to banks in lending activities, which decrease overall bank risk. Further to this end, we observe that higher trade openness helps domestic banks to smooth out income volatility and decreases the impact of a financial crisis on banks.

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Section: Openness and Bank Risk-takingsupporting

confidence: 90%

Section: Methodology and Variablesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Trade Openness and Bank Risk-Taking Behavior: Evidence from Emerging Economies

Ashraf

Arshad

Liang

2017

JRFM

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“…Furthermore, the globalization of banking activities can significantly increase the amount of risk that banks carry on their global portfolio (Gulamhussan et al, 2014), especially so if new risk-taking opportunities are available through regulatory arbitrage (Agur, 2013;Klomp and de Haan, 2013;Hoque et al, 2014;Cubillas and Gonzalez, 2014). Such excessive risk taking has financial stability implications and can affect bank valuations as well (Acharya et al, 2013).…”

Section: Introductionmentioning

confidence: 99%

The Role of Regulatory Arbitrage in U.S. Banks' International Lending Flows: Bank-Level Evidence

Temesváry

2015

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This paper examines how cross-border differences in the stringency of bank regulations affect U.S. banks' international activities. The analysis relies on a unique bank-level dataset on the globally most active U.S. banks' balance sheet as well as their cross-border, foreign affiliate lending and foreign market entry choices in 82 foreign countries in the 2003-2013 period. Results show that U.S. banks are significantly more likely to enter foreign markets with relatively laxer bank capital and disclosure requirements, and exit foreign markets with relatively stricter deposit insurance schemes and more restrictions on activities. Banks substitute away from foreign affiliate lending (via subsidiaries in the foreign country) towards cross-border lending (originating from the U.S.) in foreign countries with more powerful and independent bank regulators and limits on activities. Terms of use: Documents in JEL:F3, F4, G2 Keywords:International bank lending, Cross-border regulatory arbitrage, Foreign market entry and exit, Balance sheet effects

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Does competition lead to financial stability or financial fragility for Islamic and conventional banks? Evidence from the GCC countries

et al. 2020

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This paper investigates the nexus between stability and competition in the banking sector of the Gulf Cooperation Council. We examined a sample of 75 banks over the period 2006–2016. We found a U‐shaped relationship between bank stability and competition suggesting competition‐stability and competition‐fragility nexus. Banking concentration was found to affect instability negatively, which supported the “too important to be bailed out” view. Furthermore, we found that Islamic banks were less stable compared to conventional banks. We also found that bank size, profitability and capital regulation increase bank stability. In addition, the stock market return and the level of debt‐to‐GDP increase instability while the growth in oil price increase stability. Our findings are relevant to regulators to impose or release restrictions that boost financial stability.

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Financial liberalization and bank risk-taking: International evidence

Cited by 152 publications

References 51 publications

Trade Openness and Bank Risk-Taking Behavior: Evidence from Emerging Economies

Trade Openness and Bank Risk-Taking Behavior: Evidence from Emerging Economies

The Role of Regulatory Arbitrage in U.S. Banks' International Lending Flows: Bank-Level Evidence

Does competition lead to financial stability or financial fragility for Islamic and conventional banks? Evidence from the GCC countries

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