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Macroeconomic effect and risk-taking behavior in a dual banking system

Faaza Fakhrunnas, Wulan Dar and Mustika Noor Mifrahi ()
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Mustika Noor Mifrahi: Department of Economics, Universitas Islam Indonesia, Yogyakarta, Indonesia

Economic Journal of Emerging Markets, 2018, vol. 10, issue 2, 165-176

Abstract: This study aims to analyze the relationship between macroeconomic factors and risk-taking behavior in a dual banking system. Adopting a panel cointegration approach, this research posits macroeconomic factors as exogenous variables and risk-taking behavior as endogenous variables. With having 468 quarterly- observations consisting of 18 banks in Indonesia during 2010-Q4 to 2017-Q1, it finds that the risk-taking behavior of the banks has a long-term relationship with macroeconomic factors. Moreover, conventional bank has long-term relationship to macroeconomic nonetheless it results inversely to Islamic bank. In terms of bank- specified characteristics, bank size and equity to asset ratio are substantial factors for the banks’ risk mitigation.

Keywords: Risk-taking behavior; Macroeconomic Factors; Dual banking system (search for similar items in EconPapers)
JEL-codes: E00 E42 G00 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.20885/ejem.vol10.iss2.art5

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Handle: RePEc:uii:journl:v:10:y:2018:i:2:p:165-176