Funding liquidity risk and bank risk-taking in BRICS countries: an application of system GMM approach
Purpose: The purpose of this paper is to examine the effects of funding liquidity risk and liquidity risk on the bank risk-taking. Design/methodology/approach: This study employs a system generalized method of moments (GMM) estimation technique and a sample of 57 banks operating in BRICS countries...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
Emerald Group Publishing
2018
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| Online Access: | http://psasir.upm.edu.my/id/eprint/60601/ http://psasir.upm.edu.my/id/eprint/60601/1/Funding%20liquidity%20risk%20and%20bank%20risk-taking%20in%20BRICS%20countries%20an%20application%20of%20system%20GMM%20approach.pdf |
| _version_ | 1848854240785596416 |
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| author | Dahir, Ahmed Mohamed Mahat, Fauziah Ali, Noor Azman |
| author_facet | Dahir, Ahmed Mohamed Mahat, Fauziah Ali, Noor Azman |
| author_sort | Dahir, Ahmed Mohamed |
| building | UPM Institutional Repository |
| collection | Online Access |
| description | Purpose: The purpose of this paper is to examine the effects of funding liquidity risk and liquidity risk on the bank risk-taking.
Design/methodology/approach: This study employs a system generalized method of moments (GMM) estimation technique and a sample of 57 banks operating in BRICS countries over the period from 2006 to 2015.
Findings: The results reveal that liquidity risk has a significant and negative effect on the bank risk-taking, indicating that a decrease in liquidity risk contributes to higher bank risk-taking. The study also reveals that funding liquidity risk has the substantial impact on bank risk-taking, suggesting lower funding liquidity risk results in higher bank risk-taking. These results are consistent with prior assumptions.
Research limitations/implications: The implications of this study highlight the fact that liquidity risk is a risk factor which drives the potential bank default, of which banks tend to take more risks when higher funding liquidity exists.
Practical implications: This study offers a number of valuable implications for the policy makers as well as practitioners. The policy makers should take into account better liquidity risk management framework aimed at preventing banks from taking excessive risks. Bank executives must pay more attention on how banks could hold more liquid securities and cash. Less risk-taking reduces higher borrowing costs undermining earnings through imposing taxes on corporate.
Originality/value: This work uncovered that liquidity risk per se is an important and previously unidentified risk factor, specifically its effects on bank risk-taking and contributes to the view in support of holding more liquid securities than the past. |
| first_indexed | 2025-11-15T11:06:44Z |
| format | Article |
| id | upm-60601 |
| institution | Universiti Putra Malaysia |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-15T11:06:44Z |
| publishDate | 2018 |
| publisher | Emerald Group Publishing |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | upm-606012018-06-08T00:25:40Z http://psasir.upm.edu.my/id/eprint/60601/ Funding liquidity risk and bank risk-taking in BRICS countries: an application of system GMM approach Dahir, Ahmed Mohamed Mahat, Fauziah Ali, Noor Azman Purpose: The purpose of this paper is to examine the effects of funding liquidity risk and liquidity risk on the bank risk-taking. Design/methodology/approach: This study employs a system generalized method of moments (GMM) estimation technique and a sample of 57 banks operating in BRICS countries over the period from 2006 to 2015. Findings: The results reveal that liquidity risk has a significant and negative effect on the bank risk-taking, indicating that a decrease in liquidity risk contributes to higher bank risk-taking. The study also reveals that funding liquidity risk has the substantial impact on bank risk-taking, suggesting lower funding liquidity risk results in higher bank risk-taking. These results are consistent with prior assumptions. Research limitations/implications: The implications of this study highlight the fact that liquidity risk is a risk factor which drives the potential bank default, of which banks tend to take more risks when higher funding liquidity exists. Practical implications: This study offers a number of valuable implications for the policy makers as well as practitioners. The policy makers should take into account better liquidity risk management framework aimed at preventing banks from taking excessive risks. Bank executives must pay more attention on how banks could hold more liquid securities and cash. Less risk-taking reduces higher borrowing costs undermining earnings through imposing taxes on corporate. Originality/value: This work uncovered that liquidity risk per se is an important and previously unidentified risk factor, specifically its effects on bank risk-taking and contributes to the view in support of holding more liquid securities than the past. Emerald Group Publishing 2018 Article PeerReviewed text en http://psasir.upm.edu.my/id/eprint/60601/1/Funding%20liquidity%20risk%20and%20bank%20risk-taking%20in%20BRICS%20countries%20an%20application%20of%20system%20GMM%20approach.pdf Dahir, Ahmed Mohamed and Mahat, Fauziah and Ali, Noor Azman (2018) Funding liquidity risk and bank risk-taking in BRICS countries: an application of system GMM approach. International Journal of Emerging Markets, 13 (1). pp. 231-248. ISSN 1746-8809 https://www.emeraldinsight.com/doi/abs/10.1108/IJoEM-03-2017-0086 10.1108/IJoEM-03-2017-0086 |
| spellingShingle | Dahir, Ahmed Mohamed Mahat, Fauziah Ali, Noor Azman Funding liquidity risk and bank risk-taking in BRICS countries: an application of system GMM approach |
| title | Funding liquidity risk and bank risk-taking in BRICS countries: an application of system GMM approach |
| title_full | Funding liquidity risk and bank risk-taking in BRICS countries: an application of system GMM approach |
| title_fullStr | Funding liquidity risk and bank risk-taking in BRICS countries: an application of system GMM approach |
| title_full_unstemmed | Funding liquidity risk and bank risk-taking in BRICS countries: an application of system GMM approach |
| title_short | Funding liquidity risk and bank risk-taking in BRICS countries: an application of system GMM approach |
| title_sort | funding liquidity risk and bank risk-taking in brics countries: an application of system gmm approach |
| url | http://psasir.upm.edu.my/id/eprint/60601/ http://psasir.upm.edu.my/id/eprint/60601/ http://psasir.upm.edu.my/id/eprint/60601/ http://psasir.upm.edu.my/id/eprint/60601/1/Funding%20liquidity%20risk%20and%20bank%20risk-taking%20in%20BRICS%20countries%20an%20application%20of%20system%20GMM%20approach.pdf |