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

  • Arnaud Bourgain

    ()

    (CREA, University of Luxembourg)

  • Patrice Pieretti

    ()

    (CREA, University of Luxembourg)

  • Skerdilajda Zanaj

    ()

    (CREA, University of Luxembourg)

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.

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File URL: http://wwwfr.uni.lu/content/download/39740/475015/file/2011-11%20-%20Financial%20openness,%20disclosure%20and%20bank%20risk-taking%20in%20MENA%20countries.pdf
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Paper provided by Center for Research in Economic Analysis, University of Luxembourg in its series CREA Discussion Paper Series with number 11-11.

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Date of creation: 2011
Date of revision:
Handle: RePEc:luc:wpaper:11-11
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  1. Arun, Thankom G. & Turner, John David, 2003. "Corporate Governance of Banks in Developing Economies: Concepts and Issues," Development Economics and Public Policy Working Papers 30551, University of Manchester, Institute for Development Policy and Management (IDPM).
  2. Almounsor Abdullah, 2008. "Capital Flight Accounting and Welfare Implications in the MENA Region," Review of Middle East Economics and Finance, De Gruyter, vol. 4(2), pages 1-67, April.
  3. Anzoategui Diego & Martinez Peria Maria S. & Rocha Roberto R, 2010. "Bank Competition in the Middle East and Northern Africa Region," Review of Middle East Economics and Finance, De Gruyter, vol. 6(2), pages 26-48, November.
  4. Admati, Anat R & Pfleiderer, Paul, 2000. "Forcing Firms to Talk: Financial Disclosure Regulation and Externalities," Review of Financial Studies, Society for Financial Studies, vol. 13(3), pages 479-519.
  5. Angkinand, Apanard & Wihlborg, Clas, 2010. "Deposit insurance coverage, ownership, and banks' risk-taking in emerging markets," Journal of International Money and Finance, Elsevier, vol. 29(2), pages 252-274, March.
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