Risk‐taking behaviour of Islamic banks: application of prospect theory

Alam, Nafis; Tang, Kin Boon

doi:10.1108/17554171211252493

Cited by 24 publications

(16 citation statements)

References 28 publications

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“…Jika regulator memahami bahwa manajer bank mungkin menjadi kurang risk-averse ketika mereka beroperasi di bawah target dan kecenderungan ini meningkat ketika keuntungn mulai menurun. Jika regulator bank sadar akan hubungan ini, mungkin fungsi pengawasan regulasi bank dapat dibuat lebih efektif mencegah lebih banyak kegagalan bank di masa depan (Alam & Boon Tang, 2012).…”

Section: Teori Dan Metodeunclassified

Peningkatan Market Share Bank Syariah Melalui Kinerja Keuangan; Antara Moderasi Efisiensi Dan Risk-Taking Behavior

Ubaidi¹

2020

MALIA

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Conducting analysis of efficiency, risk-taking behavior and market share of Islamic Banking in Indonesia. Conducted to answer the question of the still low market share of sharia banking in the national banking industry. The presence of Sharia Banking on dual banking system is still minimal. The monthly data sample of 34 Shariah Bank in Indonesia (11 Sharia Commercial Banks, 13 Sharia Business Units) is used to test the research hypothesis for the period from 2014 to 2017 using the estimator Generalized Method of Moments. The results show that there is a significant relationship and / or influence between the efficiency, risk-taking behavior and market share of Sharia Banking in Indonesia. Effect of moderation Efficiency and Risk-Taker Behavior on Financial Performance of Sharia Banking. Research limitations/ implications - Firstly, this paper focuses only on the sharia banking industry in Indonesia that adopts pro-active models, and therefore, expanding the investigation to include countries adopting different models may provide a better and more comprehensive view of the correlation between efficiency, risk-taking behavior and market share of Sharia Banking. Secondly, there is a need for more empirical data to be used, such as 7 years or more. This paper provides empirical evidence to regulators and policymakers in Indonesia, to understand how to increase the market share of sharia banking to the national banking industry. Furthermore, the sharia banking shareholder intends to increase the market share of sharia banking as one of the pillars of sharia finance in Indonesia which continues to grow. Previous studies have only discussed financial performance, efficiency and risk-taker behaviors without linking to market share levels. Because the discussion of market share is usually monopolized marketing studies..

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Section: Teori Dan Metodeunclassified

Peningkatan Market Share Bank Syariah Melalui Kinerja Keuangan; Antara Moderasi Efisiensi Dan Risk-Taking Behavior

Ubaidi¹

2020

MALIA

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“…Credit Risk is a risk that faced by bank when the financing that given by bank to the customer cannot be paid accordingly (IFSB, 2012;IFSB, 2005). In this research the proxy of credit risk used is Financing to Asset Ratio that has been used by Alam and Tang (2012) who introduced FAR to measure the risk taking behaviour that Islamic bank have taken during the observe period.…”

Section: Literature Review Ifsb Guideline On Risk Managementmentioning

confidence: 99%

“…The risk taking becomes a general preposition because in non-symmetric condition of information, bank managers and / or shareholders tend to prefer a higher level of risk with an expectation of a higher return rate (Taswan, 2009). The amount of risk taken by banks can be measured through Loan to Asset Ratio (LAR) or in Islamic Bank; it is called as Financing to Asset Ratio (Alam & Tang, 2012). Alam and Tang (2012) states that FAR are the ratio used to show the bank's ability to meet customer credit requests based on the total assets owned by bank.…”

Section: Introductionmentioning

confidence: 99%

“…The amount of risk taken by banks can be measured through Loan to Asset Ratio (LAR) or in Islamic Bank; it is called as Financing to Asset Ratio (Alam & Tang, 2012). Alam and Tang (2012) states that FAR are the ratio used to show the bank's ability to meet customer credit requests based on the total assets owned by bank. FAR has a positive influence on bank financing.…”

Section: Introductionmentioning

confidence: 99%

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The Determinant of Credit Risk in Indonesian Islamic Commercial Banks

Syamlan

Jannah

2019

SJEKI

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The credit risk in Islamic Banking rises significantly due to the escalation of non-performing financing. On the other hand, the asset growth of Islamic banks also not as explosive as happened in the year 2010 – 2014. This study aims to analyze the influence of bank size, leverage, bank ages, other competitor banks, Capital Adequacy Ratio (CAR) and Non-Performing Financing (NPF) on the level of risk-taking of Islamic banks in Indonesia. Risk-taking is peroxided by Financing Asset Ratio (FAR) which hasn’t been researched deeply by other researchers, especially in the Islamic banking industry. To measure the risk-taking, this research took cross-section data of Islamic banks in Indonesia from 2010 to 2017 which obtained from the financial reports of 5 full-fledged Islamic banks namely Bank Muamalat Indonesia, Bank Syariah Mandiri, Bank Syariah Mega Indonesia, Bank Syariah Bukopin, Bank Panin Syariah, Bank Rakyat Indonesia Syariah, Bank Central Asia Syariah, and Bank Negara Indonesia Syariah. This study uses a panel data regression method. The result shows that bank size and bank age have a significant positive effect on risk-taking. Leverage and other competitor banks have a significant negative effect on risk-taking, and CAR and NPF have a negative but insignificant effect. This study recommends that Islamic banks should try to diversify the risk by introducing the new product that is based on the Mudharabah Muqayyadah.==================================================================================================Determinan Risiko Kredit pada Bank Umum Syariah di Indonesia. Risiko kredit dalam Perbankan Syariah meningkat secara signifikan seiring dengan meningkatnya pembiayaan bermasalah. Di sisi lain, pertumbuhan aset bank syariah juga tidak semasif yang terjadi antara tahun 2010 - 2014. Penelitian ini bertujuan untuk menganalisis pengaruh ukuran bank, leverage, umur bank, bank pesaing lainnya, Capital Adequacy Ratio (CAR) dan Non Performing Financing (NPF) terhadap tingkat pengambilan risiko bank syariah di Indonesia. Pengambilan risiko dipengaruhi oleh Financing Asset Ratio (FAR) yang belum diteliti secara mendalam oleh peneliti lain terutama di industri perbankan syariah. Untuk mengukur pengambilan risiko, penelitian ini mengambil data cross-section bank syariah di Indonesia dari 2010 hingga 2017 yang diperoleh dari laporan keuangan lima Bank Umum Syariah yaitu Bank Muamalat Indonesia, Bank Syariah Mandiri, Bank Syariah Mega Indonesia, Bank Syariah Bukopin, Bank Panin Syariah, Bank Rakyat Indonesia Syariah, Bank Central Asia Syariah, dan Bank Negara Indonesia Syariah. Data untuk penelitian ini dianalisis dengan metode regresi. Hasil penelitian menunjukkan bahwa ukuran bank dan usia bank memiliki pengaruh positif yang signifikan terhadap pengambilan risiko, sementara leverage dan bank pesaing lainnya memiliki efek negatif yang signifikan terhadap pengambilan risiko. Dua variabel lain, yaitu CAR dan NPF memiliki pengaruh negatif tetapi tidak signifikan terhadap pengambilan risiko. Penelitian ini merekomendasikan agar bank syariah mencoba untuk mendiversifikasi risiko dengan memperkenalkan produk baru yang didasarkan pada Mudharabah Muqayyadah.

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“…The obtained results also support Fiegenbaum and Thomas's (1988) findings. Alam and Boon Tang (2012) showed that Islamic banks located above target risk level tend to show risk-averse behaviour, while banks below target risk level inclined towards risk-seeking attitude. Their results also highlighted that banks which have higher loans to total asset ratio tend to take on lower risk.…”

Section: Literature Reviewmentioning

confidence: 99%

Behavioral Implications of Risk-Return Associations: An Application of Prospect Theory on CNX NIFTY Companies

Dasgupta¹

2017

AABFJ

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This study primarily investigates the risk attitudes of the fifty CNX NIFTY companies from a behavioral perspective as proposed by Kahneman and Tversky (1979) and Tversky and Kahneman (1992). It hypothesizes that for below target returns, a large majority of Indian companies would be risk-seeking, and for above target returns, most of them would be risk-averse. To fulfil its objectives, this study uses rates of return on assets and equity and the capital ratios of fifty CNX NIFTY companies over the period [2009][2010][2011][2012][2013]. It also uses Kendall's (1938) AbstractThis study primarily investigates the risk attitudes of the fifty CNX NIFTY companies from a behavioral perspective as proposed by Kahneman and Tversky (1979) and Tversky and Kahneman (1992). It hypothesizes that for below target returns, a large majority of Indian companies would be risk-seeking, and for above target returns, most of them would be riskaverse. To fulfil its objectives, this study uses rates of return on assets and equity and the capital ratios of fifty CNX NIFTY companies over the period -2013. It also uses Kendall's (1938 test to measure the correlations between above variables within the relevant groups (all companies and each sub group [under Size and Industry]). Results show that bigger and smaller Indian companies and their managers are mostly risk-seeking and risk-averse respectively and shareholders-centric in regard to their attitude. These results will have important implications for the Indian companies and managers in evaluating their risk attitudes from the behavioral perspective.JEL Classification: E37, F37, G12

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Risk‐taking behaviour of Islamic banks: application of prospect theory

Cited by 24 publications

References 28 publications

Peningkatan Market Share Bank Syariah Melalui Kinerja Keuangan; Antara Moderasi Efisiensi Dan Risk-Taking Behavior

Peningkatan Market Share Bank Syariah Melalui Kinerja Keuangan; Antara Moderasi Efisiensi Dan Risk-Taking Behavior

The Determinant of Credit Risk in Indonesian Islamic Commercial Banks

Behavioral Implications of Risk-Return Associations: An Application of Prospect Theory on CNX NIFTY Companies

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