Impact of general trust on bank risk-taking: the moderating effect of confidence in banks

Abstract

Purpose

This study examines the effect of general trust (GT) and confidence in banks (CIB) on bank risk-taking. Besides, it explores the moderating role of CIB on the relationship between GT and bank risk-taking.

Design/methodology/approach

Secondary data was obtained from the World Value Survey, World Bank and BankFocus from 2011 to 2018. Two-step system GMM estimator was used to examine the links between the GT and CIB with bank risk-taking in MENA region.

Findings

Results indicated that both GT and CIB negatively influenced bank risk-taking. Moreover, CIB weakened the negative relationship between GT and bank risk-taking. However, the results were different for MENA region as compared to the full sample.

Originality/value

The studies on the link between trust and bank risk-taking are either carried out on an international sample or using a developed economies sample. However, the authors believe that developing economies might exhibit different relationships due to cultural and structural differences present in developed countries. Besides, the authors believe that testing the moderating effect of CIB could shed more light on the differences between developing and developed countries.

Citation

Masoud, H. and Albaity, M. (2022), "Impact of general trust on bank risk-taking: the moderating effect of confidence in banks", Journal of Economic Studies, Vol. 49 No. 3, pp. 453-471. https://doi.org/10.1108/JES-09-2020-0479