The Factors Influencing Banks' Risk-Taking Behavior: Evidence from The Turkish Banking Industry

Erdal Demir and Yüksel Aydın

Journal of Research in Economics, Politics & Finance, 2025, vol. 10, issue 2, 636-654

Abstract: This research employs an empirical approach to analyse the factors affecting the risk-taking of commercial banks in Turkey for the period 2010-2023. The inverse Z score was utilised as a measure of bank risk-taking in the developed panel data regression models, while various bank-level and macro-level variables were employed as independent variables. The developed models in this article are estimated separately for the main sample, which includes all banks, and for the sub-samples that have been formed. According to the results based on fixed effects regressions, bank size, bank capital, bank deposit and net interest margin variables tend to reduce the level of bank risk taking in terms of the main sample. However, liquidity risk, credit risk, inflation rate, economic growth and the COVID-19 pandemic crisis tend to increase the level of bank risk taking. Findings from subsamples of listed, non-listed, domestic and foreign banks indicate that bank size, bank capital and net interest margin tend to reduce the level of bank risk taking, which supports the findings from the main sample. Finally, the results of this article have important implications for bank management, regulatory mechanisms and policy makers in terms of controlling the risk-taking behavior of banks, ensuring stability in the banking sector and building a sustainable banking sector.

Keywords: Bank Risk Taking; Commercial Banks; Turkish Banking System; Panel Data Analysis (search for similar items in EconPapers)
JEL-codes: C33 G21 G32 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ahs:journl:v:10:y:2025:i:2:p:636-654

DOI: 10.30784/epfad.1645226

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