Impact of trade openness on bank risk-taking behavior: Evidence from a developing country

Figures & data

Figure 1. The impacts of trade openness and other control variables on bank risk-taking.

Table 1. Description of the variable

Variable	Symbol	Definition
Risk	NPLTL	The ratio of nonperforming loan to total loan.
	SROA	The standard deviation of return on assets (Volatility of ROA).
	SROE	The standard deviation of return on equity (Volatility of ROE).
	LLPTL	The ratio of loan loss provision to total loan.
Bank Size	SIZE	Natural logarithm of total assets.
Bank Growth	AG	Year to Year assets growth of the bank.
Liquidity	LIQUIDITY	The ratio of total loan to the total deposit.
Trade Openness	TO	Trade Openness is the sum of export and import divided by GDP.
Deposit Insurance	DI	Dummy variable, Equal to 1 if a country has explicit deposit and 0 otherwise.
Industry Concentration	IC	This is a measure of HHI which indicates the sum of squared market shares of all of the banks in the industry.
Capital Stringency	CS	Measures compliance with BASEL guideline regarding risk weights.

Table 2. Descriptive statistics

	N	Minimum	Maximum	Mean	Std. Deviation
NPLTL	530	.00	.45	.0749	.083
LLPTL	530	.00	.54	.0292	.041
SROA	530	.00	3.73	.8174	.612
SROE	530	.84	51.91	10.7702	9.574
TO	530	.24	.46	.3508	.060
AG	530	.00	218.79	8.0091	13.893
Size	530	.05	14.85	11.3151	1.210
Liquidity	530	.06	1.54	.8203	.126
DI	530	1.00	11.00	1.0189	.434
IC	530	−843.92	3426.95	210.9618	370.966
CS	530	−25.88	24.17	10.6992	4.045

Table 3. Correlation matrix

Correlations
	NPLTL	LLPTL	SROA	SROE	Tradeopenness	AG	Size	Liquidity	DI	IC	CS
NPLTL	^1
LLPTL	.596**	^1
SROA	.495**	.320*	^1
SROE	334**	.149**	423**	^1
Tradeopenness	−.290*	−.129**	−.046	−.027	^1
AG	−.187**	−.086*	−.062	−.096*	.213**	^1
Size	.106*	.214**	.193**	.065	.497**	.311**	^1
Liquidity	−.376**	−.337**	−.336**	−.261**	.153**	.202**	−.021	^1
DI	−.008	−.020	−.021	.018	−.008	.002	.040	.027	^1
IC	.142**	.082	−.073	−.025	−.337**	−.220**	−.316**	−.193**	−.023	^1
CS	−.370**	−.294**	−.285**	−.306**	.209**	.176**	.026	.178**	.020	−.037	^1

**Correlation is significant at the 0.01 level (2-tailed)

*Correlation is significant at the 0.05 level (2-tailed)

Table 4. The effect of trade openness on risk

Variable	NPLTL	LLPTL	SROA	SROE
TO	−0.3976*** (−4.40599)	−0.10799** (−3.10983)	−0.78067*** (−4.9868)	−1.17462** (−2.18912)
AG	0.000192* (1.654106)	0.000114* (0.625405)	0.002647* (1.52022)	−0.01218** (−2.94614)
SIZE	0.009386** (2.164756)	0.007858*** (3.690764)	−0.0113* (−0.68239)	0.190066*** (4.282279)
LIQUIDITY	−0.10143*** (−3.44874)	−0.08207* (−1.24885)	0.044966* (0.470571)	0.470288** (2.107965)
DI	−0.00573** (−2.27441)	−0.00481** (−3.2113)	−0.00793** (−1.98272)	−0.01797*** (−3.16874)
IC	1.54E-05* (1.717067)	7.20E-06* (1.28463)	−5.23E-05* (−1.07573)	8.25E-05* (1.51736)
CS	−0.00335*** (−3.69637)	−0.00218*** (−4.20707)	−0.00588* (−0.74676)	0.002525* (0.468745)
C	0.228491*** (6.018934)	0.071582*** (1.111433)	1.253806*** (5.398931)	8.545639*** (5.568796)
J-statistic (probability)	0.294	0.341	0.427	0.483
AR(1)	0.009	0.056	0.090	0.055
AR(2)	0.180	0.202	0.185	0.177
Prob. (F-statistic)	0	0	0.016246	0
Instrument rank	8	8	8	8