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The impact of political instability on risk‐taking in the banking sector: International evidence using a dynamic panel data model (System‐GMM)
Author(s) -
Rezgallah Hamed,
Özataç Nesrin,
Katircioğlu Salih
Publication year - 2019
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.3075
Subject(s) - nexus (standard) , political instability , panel data , politics , language change , government (linguistics) , economics , robustness (evolution) , political risk , instability , econometrics , monetary economics , computer science , political science , art , linguistics , philosophy , biochemistry , chemistry , literature , physics , mechanics , law , gene , embedded system
This paper contributes to the existing literature by investigating the impact of political instability risk on risk‐taking in the banking sector of 75 countries, which is the first attempt for this nexus to the best of our knowledge. The dynamic panel data model (System‐GMM) showed that political instability risk significantly increases risk‐taking in the banking sector. Besides, corruption levels and government ineffectiveness are the most important channels of political instability that affect the banking sector risk. The results also actively support the “too big to fail” hypothesis. Finally, the robustness results confirm the conclusions derived from the baseline System‐GMM model.