Behavioural implications of risk–return associations based on the adjusted thermal optimal path method: Large versus small banks

IF 2.8 3区 经济学 Q2 BUSINESS, FINANCE International Journal of Finance & Economics Pub Date : 2023-09-13 DOI:10.1002/ijfe.2890
Yousra Trichilli, Hana Kharrat, Mouna Boujelbène
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Abstract

This article investigates the impact of bank size and business model on bank risk-taking within the framework of the prospect theory. To fulfil this objective, we use the adjusted thermal optimal path model. The results suggest that conventional banks adopt the same risk-taking behaviour for performance measures, regardless of their size. However, the size mainly influences the attitudes of managers towards Islamic banks. On the other hand, small Islamic banks, whether under- or over-performing, take excessive risks. This behaviour is mainly explained by loss aversion. However, large Islamic banks that situated above the target are risk-averse, since they adopt defensive behaviour. The results reveal that for risk measures and for both small and large banks, a bank's business model does not affect managers' attitude to risk. Therefore, small (large) banks adopt excessive risk-taking (risk-averse) behaviour and an offensive (defensive) strategy. The study has important implications for GCC banking regulators, supervisors, and market participants. Thus, our findings imply that understanding the impact of the bank size and business model on the risk-taking behaviour of Islamic and conventional banks can help them reduce their risk and mitigate moral hazard and regulatory arbitrage behaviour.

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基于调整热最优路径法的风险收益关联的行为影响:大型银行与小型银行
本文在前景理论的框架内研究了银行规模和业务模式对银行风险承担的影响。为实现这一目标,我们使用了调整热最优路径模型。结果表明,传统银行无论其规模大小,在业绩衡量方面都采取相同的风险承担行为。然而,规模主要影响管理者对伊斯兰银行的态度。另一方面,小型伊斯兰银行无论是表现不佳还是表现优异,都会承担过高的风险。这种行为的主要原因是损失规避。然而,业绩高于目标值的大型伊斯兰银行则是风险规避型的,因为它们采取的是防御性行为。研究结果表明,就风险衡量标准而言,无论是小型银行还是大型银行,银行的业务模式都不会影响管理者对风险的态度。因此,小(大)银行采取过度冒险(规避风险)行为和进攻(防御)战略。这项研究对海湾合作委员会的银行业监管者、监督者和市场参与者具有重要意义。因此,我们的研究结果表明,了解银行规模和业务模式对伊斯兰银行和传统银行承担风险行为的影响有助于它们降低风险,减少道德风险和监管套利行为。
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来源期刊
CiteScore
5.70
自引率
6.90%
发文量
143
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