Behavioural implications of risk–return associations based on the adjusted thermal optimal path method: Large versus small banks
本文用调整热最优路径模型研究银行规模和业务模式对风险承担的影响，发现传统银行风险行为与规模无关，而伊斯兰银行中，小银行过度冒险，大银行规避风险，对海湾地区监管有启示。
Abstract This article investigates the impact of bank size and business model on bank risk‐taking within the framework of the prospect theory. To fulfil this objective, we use the adjusted thermal optimal path model. The results suggest that conventional banks adopt the same risk‐taking behaviour for performance measures, regardless of their size. However, the size mainly influences the attitudes of managers towards Islamic banks. On the other hand, small Islamic banks, whether under‐ or over‐performing, take excessive risks. This behaviour is mainly explained by loss aversion. However, large Islamic banks that situated above the target are risk‐averse, since they adopt defensive behaviour. The results reveal that for risk measures and for both small and large banks, a bank's business model does not affect managers' attitude to risk. Therefore, small (large) banks adopt excessive risk‐taking (risk‐averse) behaviour and an offensive (defensive) strategy. The study has important implications for GCC banking regulators, supervisors, and market participants. Thus, our findings imply that understanding the impact of the bank size and business model on the risk‐taking behaviour of Islamic and conventional banks can help them reduce their risk and mitigate moral hazard and regulatory arbitrage behaviour.