Does Trade Openness Affect Bank Risk-Taking Behavior? Evidence from BRICS Countries
1
Department of Accounting & Information Systems, Comilla University, Cumilla 3506, Bangladesh
2
School of Management, Huazhong University of Science and Technology, Wuhan 430074, China
3
School of Finance, Jiangxi University of Finance and Economics, Nanchang 330000, China
4
Department of Business Administration, Noakhali Science and Technology University, Noakhali 3814, Bangladesh
*
Author to whom correspondence should be addressed.
Economies 2020, 8(3), 75; https://doi.org/10.3390/economies8030075
Received: 19 July 2020 / Revised: 4 September 2020 / Accepted: 8 September 2020 / Published: 14 September 2020
(This article belongs to the Special Issue International Trade and Its Intersection with Development, Labor, and Public Economics)
In this paper, we examine the impact of trade openness on bank risk-taking behavior employing a panel dataset of 899 banks from the BRICS (i.e., Brazil, Russia, India, China, and South Africa) countries over the period 2000–2017. We find that higher trade openness lowers bank risk-taking. Our results are robust when we use alternative proxies of trade openness and bank risk-taking, estimate country-wise regressions, or use alternative estimation methods such as system Generalized Methods of Moments (GMM), fixed effects, pooled Ordinary Least Square (OLS), and Vector Error Correction Model (VECM) models. We also observe higher trade openness decreases bank risk-taking in both the short and long run. Moreover, banks in more open countries perform relatively better during the crisis period further signifying the diversification benefits of openness. Together, our findings imply the beneficial impact of trade openness for financial sector stability.
View Full-Text
Keywords:
trade openness; bank risk-taking; financial crisis; financial stability; system GMM; VECM
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited
MDPI and ACS Style
Rahman, M.M.; Begum, M.; Ashraf, B.N.; Masud, M..A.K. Does Trade Openness Affect Bank Risk-Taking Behavior? Evidence from BRICS Countries. Economies 2020, 8, 75. https://doi.org/10.3390/economies8030075
AMA Style
Rahman MM, Begum M, Ashraf BN, Masud MAK. Does Trade Openness Affect Bank Risk-Taking Behavior? Evidence from BRICS Countries. Economies. 2020; 8(3):75. https://doi.org/10.3390/economies8030075
Chicago/Turabian StyleRahman, Mohammed M.; Begum, Munni; Ashraf, Badar N.; Masud, Md. A.K. 2020. "Does Trade Openness Affect Bank Risk-Taking Behavior? Evidence from BRICS Countries" Economies 8, no. 3: 75. https://doi.org/10.3390/economies8030075
Find Other Styles
Note that from the first issue of 2016, MDPI journals use article numbers instead of page numbers. See further details here.
Search more from Scilit
