Are entrepreneurial and managerial trust and banks' risk-taking behavior related? Empirical evidence from China

IF 4.8 2区经济学 Q1 BUSINESS, FINANCE

Pacific-Basin Finance Journal Pub Date : 2025-03-04 DOI:10.1016/j.pacfin.2025.102725

Mohan Fonseka , Grant Richardson

{"title":"Are entrepreneurial and managerial trust and banks' risk-taking behavior related? Empirical evidence from China","authors":"Mohan Fonseka , Grant Richardson","doi":"10.1016/j.pacfin.2025.102725","DOIUrl":null,"url":null,"abstract":"<div><div>This study examines the relationship between entrepreneurial and managerial trust (EMT) on banks' risk-taking behavior in China. We provide evidence that the effect of EMT on bank risk-taking is a curvilinear (U-shaped) relationship. As EMT increases, bank risk-taking decreases before rising at the bank headquarters level, which permeates to the branch level. Moderating obseeffects analyses of bank characteristics indicate that the curvilinear relationship is stronger for state-owned, large, less efficient, and high non-interest income banks. Furthermore, moderating effects analyses of institutional characteristics show that the curvilinear relationship is stronger for banks in provinces with high institutional efficiency, government and market regulation, and law enforcement levels. However, we find that the introduction of a deposit insurance policy in China does not change the relationship between EMT and bank risk-taking behavior. Overall, our result of a curvilinear relationship helps answer the empirical puzzle about the contrasting positive and negative influences of trust on banks' risk-taking behavior found in prior research.</div></div>","PeriodicalId":48074,"journal":{"name":"Pacific-Basin Finance Journal","volume":"91 ","pages":"Article 102725"},"PeriodicalIF":4.8000,"publicationDate":"2025-03-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Pacific-Basin Finance Journal","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0927538X25000629","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}

引用次数: 0

Abstract

This study examines the relationship between entrepreneurial and managerial trust (EMT) on banks' risk-taking behavior in China. We provide evidence that the effect of EMT on bank risk-taking is a curvilinear (U-shaped) relationship. As EMT increases, bank risk-taking decreases before rising at the bank headquarters level, which permeates to the branch level. Moderating obseeffects analyses of bank characteristics indicate that the curvilinear relationship is stronger for state-owned, large, less efficient, and high non-interest income banks. Furthermore, moderating effects analyses of institutional characteristics show that the curvilinear relationship is stronger for banks in provinces with high institutional efficiency, government and market regulation, and law enforcement levels. However, we find that the introduction of a deposit insurance policy in China does not change the relationship between EMT and bank risk-taking behavior. Overall, our result of a curvilinear relationship helps answer the empirical puzzle about the contrasting positive and negative influences of trust on banks' risk-taking behavior found in prior research.

查看原文本刊更多论文

求助全文

约1分钟内获得全文求助全文

来源期刊

Pacific-Basin Finance Journal BUSINESS, FINANCE-

CiteScore

6.80

自引率

6.50%

发文量

157

期刊介绍： The Pacific-Basin Finance Journal is aimed at providing a specialized forum for the publication of academic research on capital markets of the Asia-Pacific countries. Primary emphasis will be placed on the highest quality empirical and theoretical research in the following areas: • Market Micro-structure; • Investment and Portfolio Management; • Theories of Market Equilibrium; • Valuation of Financial and Real Assets; • Behavior of Asset Prices in Financial Sectors; • Normative Theory of Financial Management; • Capital Markets of Development; • Market Mechanisms.