Trustworthiness, good governance and risk taking in MENA countries
Document Type
Article
Publication Date
12-1-2021
Abstract
This study investigates the role of trustworthiness and governance quality in banks' risk-taking behavior, along with other bank-specific and country-specific variables commonly studied. By employing a dataset comprising 202 banks in 16 countries in the Middle East and North Africa (MENA) from 2011 to 2017 and a two-step generalized method of moments methodology, trustworthiness was tested directly in relation to risk taking and indirectly through the quality of the channel of governance. Our results indicate that trustworthiness reduces risk-taking, whereas governance quality exacerbates the risk-taking behavior of MENA banks. However, the effect of trustworthiness on risk-taking changes with good governance, indicating the substitution effect of trust on risk-taking because of the existence of weak formal institutions in MENA countries. The study recommends significant policies that can be implemented to promote public trust and bank stability. Copyright (C) 2020, Borsa Istanbul Anonim Sirketi. Production and hosting by Elsevier B.V.
Keywords
Confidence, MENA, Risk-taking, Trustworthiness
Divisions
Finance_and_Banking
Publication Title
Borsa Istanbul Review
Volume
21
Issue
4
Publisher
Elsevier
Publisher Location
RADARWEG 29, 1043 NX AMSTERDAM, NETHERLANDS