scholarly journals State Ownership and Risk-Taking Behavior: An Empirical Approach to Get Better Profitability, Investment, and Trading Strategies for Listed Corporates in Vietnam

Economies ◽  
2020 ◽  
Vol 8 (2) ◽  
pp. 46
Author(s):  
Tran Thai Ha Nguyen ◽  
Massoud Moslehpour ◽  
Thi Thuy Van Vo ◽  
Wing-Keung Wong
Keyword(s):  
Risk Taking ◽  
Dominant Role ◽  
Generalized Method Of Moments ◽  
Trading Strategy ◽  
State Ownership ◽  
Trading Strategies ◽  
Risk Appetite ◽  
Risk Taking Behavior ◽  
Corporate Risk ◽  
The Impact

Corporate risk-taking behavior and investment is a crucial factor in order to seek higher profits and a better trading strategy. Competitive advantage and innovation, while maintaining profitability and state ownership, are considered as crucial resources. Furthermore, it is essential to connect the short-term and long-term business and investment objectives plus stakeholder’s expectations to corporate sustainability and development. This connection is especially important in the context of transforming economies and getting better trading strategies. This study estimates the relationship between state ownership, profitability, corporate risk-taking behavior, and investment in Vietnam by using Generalized Method of Moments (GMM) methods. Using the data of 501 listed non-financial corporates during the period 2007–2015 from Ho Chi Minh City and Hanoi Stock Exchanges, we find that profitability is determined as a factor to reduce corporate risk-taking acceptance caused by the chances of entrenchment. Meanwhile, the impact of state ownership on the risk appetite of corporate has a non-linear effect. In particular, state ownership reduces corporate risk-taking behavior and investment but yet increases the risk-taking behavior and investment when the state ownership rate exceeds a threshold. One the one hand, this implies that the low level of state ownership not only prevents risk-taking behavior and investment but also results in more severe agency problems, causing unsustainability due to the imbalance of interests among various stakeholders. On the other hand, a dominant role of state ownership concentration causes a boost in corporate risk-taking decision-making in investment and trading strategy, leveraging the connection of significant external resources to deal with uncertain problems. The study contributes to existing theories of corporate governance in the context of a socialist-oriented market.

CEO power, corporate risk taking and role of large shareholders

2018 ◽  
Vol 10 (1) ◽  
pp. 55-72 ◽  
Author(s):  
Junaid Haider ◽  
Hong-Xing Fang
Keyword(s):  
Risk Taking ◽  
Generalized Method Of Moments ◽  
Negative Relationship ◽  
Dynamic Panel Data ◽  
Ceo Power ◽  
Total Risk ◽  
Content Type ◽  
Large Shareholders ◽  
Corporate Risk ◽  
The Impact

Purpose This paper aims to investigate whether a powerful chief executive officer (CEO) impacts corporate risk taking in the distinctive institutional and market setting of China? Second, in case such relationship exists, the paper further aims to investigate whether the presence of large shareholders affects it, and finally, whether this effect of large shareholders varies in state-owned enterprises (SOEs) and non-state-owned enterprises (NSOEs). Design/methodology/approach The authors have used a sample of 1,502 Chinese firms listed on Shanghai and Shenzhen stock exchanges. Sample period is 2008-2013. Besides conventional fixed-effect regression, dynamic panel data estimation (generalized method of moments) is applied to address the potential endogeneity. Findings The results show that CEO power is negatively related with corporate risk taking in two risk proxies, i.e. total risk and idiosyncratic risk. Second, the presence of large shareholders significantly affects this relationship, but does not change the primary negative relationship between CEO power and corporate risk taking. Finally, the results show that the relationship between CEO power and corporate risk taking is different in SOEs and NSOEs. The findings of this paper contend the organizational and behavioral theory viewpoint that individual decisions are more extreme. Practical implications This study provides useful implication for policymakers and suggests that while evaluating CEO’s performance, institutional and market settings should be considered. Originality/value This study provides new insights on the impact of CEO power on corporate risk taking under the two distinctive features in a developing country, i.e. presence of large shareholders and state-owned enterprises.

The impact of bank liquidity risk on risk-taking and bank lending: evidence from European bank

2021 ◽  
Vol 6 (2) ◽  
pp. 82-97
Author(s):  
Hongyan Liang ◽  
Zilong Liu
Keyword(s):  
Growth Rate ◽  
Risk Taking ◽  
Fixed Effects ◽  
Liquidity Risk ◽  
Bank Lending ◽  
Basel Iii ◽  
European Banks ◽  
Risk Taking Behavior ◽  
Loan Growth ◽  
The Impact

Objective – This paper uses a sample of annual observations of European banks to examine whether the liquidity risk affects a bank’s risk-taking behavior and its future loan growth. Methodology – A sample of European banks (27 member countries of the European Union plus U.K.) over the period of 2005 to 2019 are used in this study. Liquidity risk is measured by the ratio of liquid assets to total assets. Given the longitudinal nature of the data, the authors use panel regression with bank fixed effects to control for unobserved characteristics that might affect the dependent variable. Findings – The authors find that banks holding more liquid assets take less risk and show a higher subsequent loan growth rate. These results hold for both small and large banks. Novelty – To the authors’ best knowledge, this is one of the earliest studies to carefully examine the effects of liquidity risk on risk-taking behavior and loan growth rate for European banks. Our research suggests that the current Basel III requirement on liquidity ratio can decrease bank’s risking-taking behavior while not necessarily impact their future loan growth. Type of Paper: Empirical JEL Classification: G21, G01, G18. Keywords: Bank Liquidity Risk; Risk-taking Behavior; Loan Growth; Basel III

The ascension of executives' tenure, corporate risk-taking and corporate performance: evidence from Malaysia

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Osama F. Atayah ◽  
Khakan Najaf ◽  
Ravichandran K. Subramaniam ◽  
Phaik Nie Chin
Keyword(s):  
Risk Taking ◽  
Corporate Performance ◽  
Stock Exchange ◽  
Generalized Method Of Moments ◽  
Negative Relationship ◽  
Ordinary Least Squares ◽  
Executive Management ◽  
Content Type ◽  
Top Executives ◽  
Corporate Risk

PurposeThis study aims to investigate the implication of top executives’ number of years of experience (tenure) on corporate risk-taking behaviour and corporate performance in Malaysian corporations.Design/methodology/approachTo test the hypothesis efficiently, the authors have extracted the data from Bloomberg for 788 listed companies of the Malaysian Stock Exchange. The methodology entails ordinary least squares regressions, quantile regression and dynamic system generalized method of moments model.FindingsFirst, the authors show that executive management tenure has a significant negative relationship with corporate risk-taking. It means that the long-tenured executives tend to undertake less risky strategies and decisions. Second, this study reveals that the longer executive management tenure has a positive relationship with corporate performance. Third, the moderating effect of corporate risk-taking with executive tenure (Tenure dummy*Risk) has a negative relationship with the corporate performance by 1%.Practical implicationsIt implies that the appointment of experienced executive management contributes towards corporate performance directly. However, experienced management trends take less risk, which eventually results in mitigating the corporate performance. On that basis, the findings are significant in highlighting the usefulness of executive leadership term and offers insights to academics, practitioners and policymakers.Originality/valueThis paper is novel since it is unique in evaluating the executive tenure and the preferences to handle risk strategies and how that impact the firm performance.

Capital regulation, competition and risk-taking behavior of Indian banks in a simultaneous approach

2018 ◽  
Vol 44 (4) ◽  
pp. 459-477 ◽  
Author(s):  
Santi Gopal Maji ◽  
Preeti Hazarika
Keyword(s):  
Human Capital ◽  
Risk Taking ◽  
Value Added ◽  
Capital Adequacy ◽  
Bank Risk ◽  
Capital Regulation ◽  
Content Type ◽  
Risk Taking Behavior ◽  
Indian Banks ◽  
The Impact

Purpose The purpose of this paper is to investigate the association between capital regulation and risk-taking behavior of Indian banks after incorporating the influence of competition. Further, the study intends to enrich the existing literature by providing empirical evidence on the role of human resources in managing risk along with the influence of other bank specific and macroeconomic variables. Design/methodology/approach Secondary data on 39 listed Indian commercial banks are collected from “Capitaline Plus” corporate data database for a period of 15 years. Capital is measured by capital adequacy ratio as defined by the regulators, and two definitions of risk – credit risk and insolvency risk – are employed. Competition is measured by Herfindahl-Hirschman deposits index, concentration ratio and H-statistic. The value-added intellectual coefficient model is employed to compute human capital efficiency (HCE). Three-stage least squares technique in a simultaneous equation framework is used to estimate the coefficients. Findings The study finds that absolute level of regulatory capital and bank risk are positively associated, although the influence of capital on risk is not statistically significant. The influence of competition on risk is negative for all the models, which supports the “competition stability” view. The impact of human capital on bank risk is also negative for all cases. Practical implications The findings of the study are useful for the decision makers in several ways based on the inverse influence of competition and HCE on bank risk. Further, the observed positive association between capital and risk indicates that the capital regulation is not sufficient to enhance the stability in the banking sector. Originality/value This is the first study in the Indian context that incorporates the competition in the banking industry as an explanatory variable in the extant bank capital and risk relationship.

scholarly journals Risks of Traders on the World Stock Market on the Example of Ukraine

2019 ◽  
Vol 67 ◽  
pp. 06001 ◽  
Author(s):  
George Abuselidze ◽  
Olga Mohylevska ◽  
Nina Merezhko ◽  
Nadiia Reznik ◽  
Anna Slobodianyk
Keyword(s):  
Stock Market ◽  
Financial Markets ◽  
World Market ◽  
Trading Strategy ◽  
Trading Strategies ◽  
Practical Significance ◽  
External Shocks ◽  
Domino Effect ◽  
The World ◽  
The Impact

The article reveals the essence and features of the development of the stock market in Ukraine. It was established that the vigorous activity of countries in the world financial markets means that they also face a risk of global financial turmoil (the so-called “domino effect”). It is determined that the impact of global financial instability on the country depends on the openness of its economy that will lead to significant external “shocks”. The possibility of providing effective influence on domestic stock market activity with taking into account the changing world situation, development of perfect trading strategies for each participant is substantiated. The conducted analysis of the world market conditions of stock markets in recent years has made it possible to assess the real risks for new participants in the stock market and become the basis for the development of an appropriate effective trading strategy. The practical significance of the results is that they allow for a measurable approach to assessing the existing risk when choosing one or another trading strategy to move to the world stock market.

Corruption and corporate risk-taking: evidence from emerging markets

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Quoc Trung Tran
Keyword(s):  
Emerging Markets ◽  
Risk Taking ◽  
Information Disclosure ◽  
Emerging Market ◽  
Generalized Method Of Moments ◽  
Content Type ◽  
Financing Cost ◽  
Market Index ◽  
Public Enemy ◽  
Corporate Risk

PurposeThis paper investigates the relationship between corruption and corporate risk-taking in emerging markets where corruption is considered as “public enemy number one.”Design/methodology/approachThe study measures corruption based on Corruption Control Index annually published by World Bank and examines how corruption affects corporate risk-taking in emerging markets covered in MSCI Emerging Market Index.FindingsWith a sample of 75,338 observations from 8,326 firms across 20 emerging stock markets during the period 2005–2016, the author finds that corruption negatively affects corporate risk-taking. Robustness checks with a reduced sample without China and India, alternatives of corruption measures, various measures of risk-taking and Generalized method of moments (GMM) estimator also show consistent results. Moreover, additional analysis shows that information disclosure mitigates the effect of corruption on risk-taking.Originality/valueThe extant literature implies that corruption may decrease corporate risk-taking behavior through two channels including operational cost and debt financing cost.

Corporate risk taking and sustainability: a case of listed firms from USA and Germany

2019 ◽  
Vol 10 (1) ◽  
pp. 2-15 ◽  
Author(s):  
Zahid Irhsad Younas ◽  
Ameena Zafar
Keyword(s):  
Risk Taking ◽  
Profit Maximization ◽  
Well Being ◽  
Least Square ◽  
Board Structure ◽  
Best Interest ◽  
Content Type ◽  
Listed Firms ◽  
Corporate Risk ◽  
The Impact

PurposeThis study aims to analyze the impact of corporate risk taking on the sustainability of firms in USA and Germany. As risk taking is an expensive phenomenon, the firm may shift the resources from stakeholder well-being to profit maximization of shareholders. Ultimately, risk taking results in the reduction of firm’s sustainability.Design/methodology/approachTo capture the impact of corporate risk taking, the corporate-governance variables, i.e. “independent board structure” and “board size,” were used as instrumental variables to control excessive corporate risk taking and restrict it at a healthy level. A sample of 3,387 unbalanced panel observations from USA and Germany, for the period 2004-2015, were assessed.FindingsThe results confirm that corporate risk taking has a negative and significant impact on the sustainability of firms.Research limitations/implicationsGovernment and policymakers in USA and Germany may introduce regulations to curb excessive corporate risk taking for sustainable corporations and sustainable society. This research suggests that corporate risk taking is not in the best interest of stakeholders.Originality/valuePrevious literature only finds the impact of sustainability on corporate risk taking and there is not a single study that examines the impact of corporate risk taking on the sustainability of a firm. Thus, this study contributes to existing literature on corporate risk taking and sustainability. The study further contributes by using the instrumental variable two stage least square.

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