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Financial openness, disclosure and bank risk-taking in MENA countries

Author

Listed:
  • Arnaud Bourgain

    (CREA, University of Luxembourg)

  • Patrice Pieretti

    (CREA, University of Luxembourg)

  • Skerdilajda Zanaj

    (CREA, University of Luxembourg)

Abstract

In this paper, we analyze the risk-taking behavior of banks in emerging economies in a context of international capital mobility. Our paper highlights a new channel through which depositors can exercise pressure to control risk taking. Depositors can reallocate their savings away from their home country to the more protective system of a developed economy. We recover a classical result according to which increased competition resulting from more international financial openness induces banks to take excessive risks. We find however that sufficiently high financial openness is necessary for a positive link between financial transparency and safe risk management. Finally, we test the relationship between disclosure, financial openness and bank risk-taking for a panel of 258 banks from the MENA region and Turkey.

Suggested Citation

  • Arnaud Bourgain & Patrice Pieretti & Skerdilajda Zanaj, 2011. "Financial openness, disclosure and bank risk-taking in MENA countries," DEM Discussion Paper Series 11-11, Department of Economics at the University of Luxembourg.
    • Handle: RePEc:luc:wpaper:11-11
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    More about this item

    Keywords

    banking competition; disclosure; bank risk-taking; MENA banking sectors; mock compliance;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • F39 - International Economics - - International Finance - - - Other
    • L80 - Industrial Organization - - Industry Studies: Services - - - General

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