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

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  • 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.

Suggested Citation

  • Faaza Fakhrunnas & Wulan Dari & Mustika Noor Mifrahi, 2018. "Macroeconomic effect and risk-taking behavior in a dual banking system," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 10(2), pages 165-176.
    • Handle: RePEc:uii:journl:v:10:y:2018:i:2:p:165-176:id:10802
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    File URL: https://journal.uii.ac.id/JEP/article/view/10802/8628
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    References listed on IDEAS

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    5. Hajer Zarrouk & Khoutem Ben Jedidia & Mouna Moualhi, 2016. "Is Islamic bank profitability driven by same forces as conventional banks?," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing Limited, vol. 9(1), pages 46-66, April.
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    Cited by:

    1. MB Hendrie Anto & Faaza Fakhrunnas & Yunice Karina Tumewang, 2022. "Islamic banks credit risk performance for home financing: Before and during Covid-19 pandemic," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 14(1), pages 113-125.

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