The influence of risk-taking on bank efficiency: Evidence from Colombia

Miguel Sarmiento () and Jorge Galan

Emerging Markets Review, 2017, vol. 32, issue C, 52-73

Abstract: This paper shows evidence on the influence of risk-taking on bank efficiency in emerging markets and identifies heterogeneity in the way risk affects banks with different characteristics. We fit a stochastic frontier model with random inefficiency parameters to a sample of Colombian banks. The model provides accurate cost and profit efficiency estimates. The effects of risk-taking on efficiency vary with size and affiliation. Large and foreign banks benefit more from higher exposure to credit and market risk, while domestic and small banks from being more capitalised. We identify some channels explaining these differences and provide insights for prudential regulation.

Keywords: Bank efficiency; Bayesian inference; Heterogeneity; Random parameters; Risk-taking; Stochastic frontier models (search for similar items in EconPapers)
JEL-codes: C11 C23 C51 D24 G21 G32 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1566014117301863
Full text for ScienceDirect subscribers only

Related works:
Working Paper: The influence of risk-taking on bank efficiency: evidence from Colombia (2015)
Working Paper: The Influence of Risk-Taking on Bank Efficiency: Evidence from Colombia (2015)
Working Paper: The Influence of Risk-Taking on Bank Efficiency: Evidence from Colombia (2015)
Working Paper: The Influence of Risk-taking on Bank Efficiency: Evidence from Colombia (2015)
Working Paper: The Influence of Risk-taking on Bank Efficiency: Evidence from Colombia (2015)
Working Paper: The Influence of Risk-taking on Bank Efficiency: Evidence from Colombia (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:32:y:2017:i:c:p:52-73

DOI: 10.1016/j.ememar.2017.05.007

Access Statistics for this article

Emerging Markets Review is currently edited by Jonathan A. Batten

More articles in Emerging Markets Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().