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Social aspirations in European banks: peer-influenced risk behavior

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  • Lyócsa, Štefan
  • Výrost, Tomáš
  • Baumöhl, Eduard

Abstract

We test a sample of 3,586 banks from 33 European countries to determine whether performances above or below a social aspiration level (median performance of peer banks) influence banks’ aggregate risk levels. Our results are consistent with the behavioral theory of the firm and prospect theory in that we find that bank performance below a bank’s social aspiration level is followed by increased aggregate risk, i.e., risk-taking behavior in the subsequent year. Although under-performing banks tend to be risk-takers, large banks and banks with high aggregate risk levels tend to limit the increase in their aggregate risk levels.

Suggested Citation

  • Lyócsa, Štefan & Výrost, Tomáš & Baumöhl, Eduard, 2018. "Social aspirations in European banks: peer-influenced risk behavior," EconStor Preprints 172510, ZBW - Leibniz Information Centre for Economics.
    • Handle: RePEc:zbw:esprep:172510
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    social aspiration; European banks; performance; risk behavior; prospect theory;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G2 - Financial Economics - - Financial Institutions and Services
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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