The role of strategic interactions in risk-taking behavior: A study from asset growth perspective |
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| Affiliation: | 1. School of Banking, University of Economics Ho Chi Minh City (UEH), 59C Nguyen Dinh Chieu, District 3, Ho Chi Minh City, Viet Nam;2. School of Business and Management, RMIT University Vietnam, 702 Nguyen Van Linh, District 7, Ho Chi Minh City, Viet Nam;3. Business School, University of the Fraser Valley, 33844 King Road, Office: C2423, V2S 7M8 Abbotsford, BC, Canada;1. Excelia Group, Excelia Business School, CERIIM, 102 Rue de Coureilles, 17024 La Rochelle, France;2. University Paris-Saclay, UMI SOURCE, UVSQ, IRD, France and Paris School of Business, PSB, 59 Rue Nationale, 75013 Paris, France;3. Rabat Business School, International University of Rabat, Rabat 11103, Morocco;4. Audencia Business School (AACSB, EQUIS, AMBA), France;1. School of Management and Engineering, Nanjing University, Nanjing, Jiangsu 210093, China;2. School of Economics and Management, Tsinghua University, Beijing 100084, China;3. School of Management, Shanghai University of Engineering Science, Shanghai 201620, China;4. Faculty of Business, Athabasca University, Athabasca, Alberta T9S 3A3, Canada;5. Odette School of Business, University of Windsor, Windsor, Ontario N9B 3P4, Canada;1. School of Management, Xi''an Jiaotong University, No. 28 Xianning Road, Xi''an, Shaanxi 710049, China;2. School of Management, Huazhong University of Science and Technology, Luoyu Road 1037, Wuhan, Hubei 430074, China;1. School of Economics and Management, Beihang University, Beijing 100191, China;2. Beijing Advanced Innovation Center for Big Data and Brain Computing, Beihang University, Beijing 100191, China |
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| Abstract: | This study uses panel data on Vietnamese commercial banks from 2008 to 2018 in order to investigate the role of strategic interactions in determining bank risk-taking behavior by considering bank asset growth. The results suggest that aggressive competition is less favorable for banks striving for stability and that a high value of competitive strategy measure (as a proxy for strategic interactions) encourages risk-taking incentives. We also find that the distributional effects of strategic interaction on bank risk-taking because of asset growth reveal that the uncertainty in strategic-interaction-driven profits diminishes in banks with higher growth. This finding is consistent with the idea that when competition becomes more aggressive, bank restructuring should focus on increasing total assets by merging and acquiring small- and medium-sized banks to stabilize the banking sector. Furthermore, the results demonstrate that banks with low leverage or under regulatory pressure engage in more risk-taking. Therefore, policymakers may not implement a tighter capital requirement that contributes to a heightened level of risk. The results are robust to alternative measures of risk-taking and monetary policy stance as well as different econometric specifications. |
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