Trade Openness and Bank Risk-Taking Behavior: Evidence from Emerging Economies

Journal article

Ashraf, B., Arshad, S. and Yan, L. (2017). Trade Openness and Bank Risk-Taking Behavior: Evidence from Emerging Economies. Journal of Risk and Financial Management. 10 (3), p. 15. https://doi.org/10.3390/jrfm10030015
AuthorsAshraf, B., Arshad, S. and Yan, L.
Abstract

In this paper, we examine the impact of trade openness on bank risk-taking behavior. Using a panel dataset of 291 banks from 37 emerging countries over the period from 1998 to 2012, we find that higher trade openness decreases bank risk-taking. The results are robust when we use alternative bank risk-taking proxies and alternative estimation methods. We argue that trade openness provides diversification opportunities to banks in lending activities, which decrease overall bank risk. Further to this end, we observe that higher trade openness helps domestic banks to smooth out income volatility and decreases the impact of a financial crisis on banks.

Year2017
JournalJournal of Risk and Financial Management
Journal citation10 (3), p. 15
PublisherMDPI
ISSN1911-8074
Digital Object Identifier (DOI)https://doi.org/10.3390/jrfm10030015
Web address (URL)http://www.mdpi.com/1911-8074/10/3/15
Publication dates
Online29 Jul 2017
Publication process dates
Accepted24 Jul 2017
Deposited02 Nov 2022
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Open
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