Do ESG scores effect bank risk taking and value? Evidence from European banks

2020 ◽  
Vol 27 (5) ◽  
pp. 2286-2298 ◽  
Author(s):  
Caterina Di Tommaso ◽  
John Thornton
Keyword(s):  
Risk Taking ◽  
Bank Risk ◽  
European Banks

Banking regulation and supervision: can it enhance stability in Europe?

2014 ◽  
Vol 6 (3) ◽  
pp. 244-269 ◽  
Author(s):  
Faten Ben Bouheni
Keyword(s):  
Risk Taking ◽  
Generalized Method Of Moments ◽  
Banking Regulation ◽  
European Countries ◽  
Bank Risk ◽  
Dynamic Panel ◽  
Content Type ◽  
Regulation And Supervision ◽  
European Banks ◽  
The Relationship

Purpose – This paper aims to find the effects of regulatory and supervisory policies on bank risk-taking. The same regulation and supervision have different effects on bank risk-taking depending on influence factors. These factors were considered and a sample of the largest European banks from France, Germany, UK, Italy, Spain and Greece was used over the period 2005-2011. Design/methodology/approach – In this paper, the author analyses the effects of regulation and supervision on risk-taking. The author uses a sample of the biggest banks from six European countries (France, UK, Germany, Italy, Spain and Greece) over the period 2005-2011. Because the applicable entry of IFRS was in 2005, thus data of European banks are not available before this date. For each country in the sample, the 10 largest banks (defined by total assets) that lend money to firms were identified. The author does not include central banks or postal banks, which generally do not lend money to firms and are described as non-banking institutions (La Porta et al., 2002). Findings – It was found that restrictions on bank activities, supervisors’ power and capital adequacy decrease risk-taking. Thus, regulation and supervision enhance bank’s stability. While, deposit insurance increases the risk due to its association to moral hazard. Finally, it was found that strengthening regulatory and supervisory framework raises the risk-taking and weakens the stability of European banks. Originality/value – The author contributes to existing empirical analyses in three ways. First, the existing literature has drawn a lot of attention on US banks. However, the purpose of this paper is to examine the biggest banks of three European leaders (France, Germany and UK) and three more European countries influenced by the recent crisis (Spain, Italy and Greece) over the period 2005-2011. Second, most studies focus mainly on the relationship between regulation and profitability, yet seldom on the relationship between regulation, supervision and risk-taking. The author focuses on this relationship. Third, this study applies the two-step dynamic panel data approach suggested by Blundell and Bond (1998) and also uses dynamic panel generalized method of moments (GMM) method to address potential problems. The two-step GMM estimator that the author uses is generally the most efficient.

Factors Affecting Bank Risk-Taking: Evidence from Southeast Asian Countries

2016 ◽  
Vol 23 (2) ◽  
pp. 120-136
Author(s):  
NGUYEN THANH LIEM ◽  
TRAN HUNG SON ◽  
HOANG TRUNG NGHIA
Keyword(s):  
Risk Taking ◽  
Southeast Asian ◽  
Bank Risk ◽  
Asian Countries ◽  
Factors Affecting ◽  
Southeast Asian Countries

What Explains European Banks Risk-Taking? A Simultaneous Equations Approach

2017 ◽  
Author(s):  
Catarina Fernandes ◽  
Jorge Farinha ◽  
Francisco Vitorino Martins ◽  
Cesario Mateus
Keyword(s):  
Risk Taking ◽  
Simultaneous Equations ◽  
European Banks

Internal Control Quality and Bank Risk-Taking and Performance

2020 ◽  
Author(s):  
Matthew Baugh ◽  
Matthew Ege ◽  
Christopher G. Yust
Keyword(s):  
Internal Control ◽  
Risk Taking ◽  
Downside Risk ◽  
Internal Controls ◽  
Bank Risk ◽  
Material Weakness ◽  
Control Quality ◽  
Interest Income ◽  
Upside Risk ◽  
And Performance

Using a sample of bank-years from 2005 to 2017, we examine the effect of internal control quality on future risk-taking and performance. We find that banks that disclose a material weakness in internal controls have higher risk-taking and worse performance in the future, including having a higher (lower) likelihood of experiencing large losses (gains). These findings suggest that weak controls increase (reduce) downside (upside) risk-taking or conversely that strong controls increase (reduce) upside (downside) risk-taking. Path analyses suggest that 22.3 to 43.7 percent of the effect of internal control quality on future performance is through risk-taking. Additionally, material weaknesses are negatively associated with total asset, loan, interest income, and non-interest income growth, suggesting that internal control quality affects both core and non-core activities of banks. Overall, results suggest that strong internal controls improve bank risk-taking, in part through asymmetrically reducing downside risk-taking while facilitating upside risk-taking, ultimately improving bank performance.

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