How does institutional development shape bank risk-taking incentives in the context of financial openness?

Duy Tung Bui and Thi Mai Hoai Bui

Pacific-Basin Finance Journal, 2019, vol. 58, issue C

Abstract: This paper investigates the role of institutional development on the relationship between financial openness and bank risk-taking behavior. In particular, we investigate how institutional improvement can change the impact of financial openness on bank stability. Using a panel of 37 emerging markets and 21 advanced economies over the period 2000–2015, the results show that opening the financial market affects bank risk-taking behaviors differently, depending on the degree of institutional development. Empirical evidence also supports the competition-fragility view in the case of developing countries, while it favors the competition-stability hypothesis in developed economies.

Keywords: Financial openness; Institutional development; Bank risk-taking (search for similar items in EconPapers)
JEL-codes: C23 F36 G21 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:58:y:2019:i:c:s0927538x19301738

DOI: 10.1016/j.pacfin.2019.101209

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