Risk-taking, Ownership and Excess Reserves in the Ghanaian Banking System

Odonkor, Theodora Akweley; Osei, Bright Addiyiah; Sjö, Bo

doi:10.1177/0972652716645890

Cited by 5 publications

(5 citation statements)

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“…The Proxies of Risk-Taking Behaviors Odonkor et al (2016) indicate that financial firms take more risk when excess reserves are low, and financial firms take a lower risk when excess reserves are high. This result suggests that when insurance companies receive that the markets are at risk, they like higher excess reserves than lending to borrowers, reducing risks.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Effective reserve management helps companies manage these risks by ensuring they have sufficient funds to cover unexpected losses. Odonkor et al (2016) examine the determinants of insurance companies' reserve adequacy in Ghana. The study found that reserve adequacy was positively related to firm size, profitability, and business growth.…”

Section: Introductionmentioning

confidence: 99%

“…Odonkor et al (2016) examine the determinants of insurance companies’ reserve adequacy in Ghana. The study found that reserve adequacy was positively related to firm size, profitability, and business growth.…”

Section: Introductionmentioning

confidence: 99%

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Impact of Ownership Structure and Business Diversifications on the Risk-Taking Behaviors of Insurance Companies in Vietnam

Duong,

Le,

Nguyen

et al. 2023

Sage Open

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This study analyzes the impacts of ownership structure and business diversifications on the risk-taking behaviors of insurance companies in Vietnam. Foreign ownership and institutional ownership in the insurance sector are increasing significantly due to the privatization trend in Vietnam. Besides, business diversification allows insurance firms to maximize profits and reduce insolvency. Therefore, this study enriches the current literature because it is the first to examine how ownership and diversifications affect the risk-taking behaviors of insurance companies in Vietnam. We employ the Ordinary Least Squares, Fixed Effect Models, Random Effect Models, Generalized Least Squares, and dynamic system Generalized Methods of Moments to analyze 42 insurance companies from 2005 to 2020. Our findings indicate that business diversification increases the risk-taking behaviors of insurance firms. We also figure out a U-shaped relationship between institutional ownership and risk-taking behavior, with a turning point of 9.8%. This study also indicates an inverse U-shaped relationship between foreign ownership and insurers’ risk-taking behaviors, with a turning point of 20%. Thirdly, the interaction terms between ownership and diversification suggest the moderate role of business diversification in increasing the risk of insurance firms. Our findings align with agency theory, stakeholder theory, monitoring hypothesis, expropriation hypothesis, and prior literature. This study contributes practical implications for managers and policymakers to develop the insurance sector sustainably.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Impact of Ownership Structure and Business Diversifications on the Risk-Taking Behaviors of Insurance Companies in Vietnam

Duong,

Le,

Nguyen

et al. 2023

Sage Open

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“…Similarly, Darvas and Pichler (2018) find that excess liquidity with banks might incentivize banks to engage in risky lending, which further creates financial stability risks. On the other hand, Odonkor et al (2016) find that banks in Ghana prefer high excess reserves when they perceive the market to be risky.…”

Section: Introductionmentioning

confidence: 99%

What Explains Excess Liquidity of Banks? Empirical Evidence from India

Ansari

Sensarma

2022

Journal of Emerging Market Finance

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We study excess liquidity in the banking system using data for India during 2005–2020. We apply Autoregressive Distributed Lag model and panel regressions to identify the factors determining excess liquidity at both aggregate and bank levels. We find that required reserves, private sector credit, and government securities held by banks have negative, positive, and negative effects on excess liquidity, respectively. Other factors such as exchange rate and inter-bank call rate have varying effects at the two levels. Our results suggest that banks can chalk out mechanisms to optimize their liquidity management and avoid the cost of excess liquidity. JEL Classification: C23, E50, E58, G00, G21

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“…This is an indication that DMBs with low capital to asset ratio will find it gruesome to withstand and manage their credit risk effectively and efficiently which may literally affect return on asset as a measure of banks' performance. In addition, Odonkor et al (2016) supplemented that macroeconomic factors additionally assume a significant part in risk tasking conduct of the banks while Okafor (2011) expressed that assuming enough capital isn't sufficient. It is considered fitting that banks should recognize risk which equivalent with the cash-flow to upgrade bank efficiency.…”

Section: Introductionmentioning

confidence: 99%

Capital Adequacy and Deposit Money Bank's Return on Asset (Roa) in Nigeria

Adeoti¹,

Akinroluyo²

2022

Financ. account. res. j.

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This study investigated capital adequacy and Deposit Money Bank's (DMB) Return on Asset (ROA) in Nigeria in which the effect of capital to asset ratio on bank's profit margin and the relationship between solvency and asset turnover was examined. The study population of the study comprised Nigeria deposit money banks listed on the floor of Nigeria Stock Exchange as at 2021. Sample of bank selected was Zenith Plc, Guaranty Trust Bank Plc (GTB), First Bank Nigeria Limited, Access Bank Plc, and United Bank for Africa Plc based on global ranking order and the fact that they are listed on Nigeria Stock Exchange. To determine the effect of capital adequacy on banks performance, Ordinary Least Square (OLS) regression model was employed the data collected within the period of 2006-2020. The findings of this study revealed coefficient of 0.080034 implies 1% change in capital to asset ratio would lead to 8% increase change in profit margin ratio and p-value of 0.042223 shows that CTA has statistical significant effect on profit margin of the selected banks within the period under study; coefficient of 0.04587 implies 1% change in solvency would lead to 4.58% change in asset turnover of the selected DMBs under the period studied, p-value of 0.0000611 shows that SOLV has statistical significant relationship with ATU of the selected banks within the period under study. The study recommends bank decision makers should give consideration for its solvency status and capital to asset ratio when investigating factors affecting bank’s actualization objective. In addition, DMBs in Nigeria should ensure that they maintain above minimum capital to asset ratio level in order to guarantee an efficient profit margin. Also, the ability of DMBs to meet their short and medium term financial obligations must be fortified in order to keep the performance at per. Keywords: Capital Adequacy, Return on Asset, Capital to Asset Ratio, Solvency, Profit Margin and Asset Turnover.

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Risk-taking, Ownership and Excess Reserves in the Ghanaian Banking System

Cited by 5 publications

References 50 publications

Impact of Ownership Structure and Business Diversifications on the Risk-Taking Behaviors of Insurance Companies in Vietnam

Impact of Ownership Structure and Business Diversifications on the Risk-Taking Behaviors of Insurance Companies in Vietnam

What Explains Excess Liquidity of Banks? Empirical Evidence from India

Capital Adequacy and Deposit Money Bank's Return on Asset (Roa) in Nigeria

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