Macroeconomic effect and risk-taking behavior in a dual banking system

Faaza Fakhrunnas, Wulan Dari, Mustika Noor Mifrahi

Abstract

This study aims to analyze the relationship between macroeconomic factors and risk-taking behavior in a dual banking system. Adopting a panel cointegration approach, this research posits macroeconomic factors as exogenous variables and risk-taking behavior as endogenous variables. With having 468 quarterly-observations consisting of 18 banks in Indonesia during 2010-Q4 to 2017-Q1, it finds that the risk-taking behavior of the banks has a long-term relationship with macroeconomic factors. Moreover, conventional bank has long-term relationship to macroeconomic nonetheless it results inversely to Islamic bank. In terms of bank-specified characteristics, bank size and equity to asset ratio are substantial factors for the banks’ risk mitigation.

Keywords

Risk-taking behavior, Macroeconomic Factors, Dual banking system

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Economic Journal of Emerging Markets (EJEM)
ISSN 2086-3128 (print), ISSN 2502-180X (online)
Published by:
Center for Economic Studies, Department of Economics,
Universitas Islam Indonesia, Indonesia.

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EJEM by http://journal.uii.ac.id/JEP/ is licensed under a Creative Commons Attribution 4.0 International License.