Acta Oeconomica
Volume/Issue:
Volume 73: Issue 4
Drivers of moral hazard in banks
Author:
Željko Jović National Bank of Serbia, Belgrade, Serbia
Faculty of Economics, University of Belgrade, Kamenička 6, Beograd 11000, Serbia

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https://orcid.org/0000-0002-1008-0732
Pages:
519–535
Online Publication Date:
12 Dec 2023
Publication Date:
12 Dec 2023
Article Category:
Research Article
DOI:
https://doi.org/10.1556/032.2023.00043
Keywords:
moral hazard; non-performing loans; underestimate credit risk; corporate governance; Serbia;
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Abstract

The objective of this research is to identify factors that determine the moral hazard in banks by using discrete choice models (probit and logit regression). A specially constructed indicator was used to quantitatively assess moral hazard as the average difference between the better rating of a client in a bank and the most conservative rating of the same client in the banking sector. This is an example where moral hazard manifests itself as the tendency of management in banks to underestimate credit risk. The results showed that state-owned banks and foreign privately-owned banks with evident problems at the level of their headquarters had higher values of this quantitative indicator of moral hazard. Also, banks whose financial result and capital are highly sensitive to a small increase in non-performing loans, as well as banks that at any time in the observed period had a problem with meeting regulatory capital requirements, showed a greater propensity to moral hazard, as measured by this indicator. In the above cases, in the absence of quality corporate governance, management in banks tends to show performance better than it actually is. The obtained results for Serbia in comparison with the previous research give the possibility to quantitatively confirm additional specific factors important for explaining moral hazard (composite variable of the type of ownership and capital restrictions, variables that perform only the transmission of certain forms of management behaviour, size, capital and profit sensitivity, credit risk level, etc.), in addition to the common factors of moral hazard, such as the type of ownership in the bank, capital restrictions, etc.

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Cover Acta Oeconomica
Acta Oeconomica Periodical of the Hungarian Academy of Sciences
Print ISSN:
0001-6373
Online ISSN:
1588-2659

Senior editors

Editors-in-Chief: István P. Székely, Dóra Győrffy

Editor(s): Judit Kálmán

Associate Editors

  • Péter Benczúr, Joint Joint Research Center, European Commission
  • Dóra Benedek, International Monetary Fund
  • Balázs Égert, OECD
  • Dániel Prinz, World Bank
  • Rok Spruk, University of Ljubljana, School of Economics and Business, Slovenia

Editorial Board

  • Anders Åslund, Georgetown University and Advisory Council of CASE, USA
  • István Benczes, Corvinus University of Budapest, Hungary 
  • Agnieszka Chłoń-Domińczak, SGH Warsaw School of Economics, Poland
  • Fabrizio Coricelli, University of Siena, Italy
  • László Csaba, Corvinus University of Budapest, Hungary and Central European University, Austria
  • Beáta Farkas, Faculty of Economics and Business Administration, University of Szeged, Hungary
  • Péter Halmai, Budapest University of Technology and Economics, and National University of Public Service, Hungary
  • Martin Kahanec, Central European University, Austria
  • Michael Landesmann, The Vienna Institute for International Economic Studies (WIIW), Austria
  • Péter Mihályi, Corvinus University of Budapest, Hungary
  • Debora Revoltella, European Investment Bank

Corvinus University of Budapest
Department of Economics
Fővám tér 8 Budapest, H-1093, Hungary
E-mail: judit.kalman@uni-corvinus.hu

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2023  
Web of Science  
Journal Impact Factor 0.7
Rank by Impact Factor Q3 (Economics)
Journal Citation Indicator 0.23
Scopus  
CiteScore 1.4
CiteScore rank Q3 (Economics and Econometrics)
SNIP 0.385
Scimago  
SJR index 0.218
SJR Q rank Q4

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Acta Oeconomica
Language English
Size B5
Year of
Foundation		 1966
Volumes
per Year		 1
Issues
per Year		 4
Founder Magyar Tudományos Akadémia
Founder's
Address		 H-1051 Budapest, Hungary, Széchenyi István tér 9.
Publisher Akadémiai Kiadó
Publisher's
Address		 H-1117 Budapest, Hungary 1516 Budapest, PO Box 245.
Responsible
Publisher		 Chief Executive Officer, Akadémiai Kiadó
ISSN 0001-6373 (Print)
ISSN 1588-2659 (Online)

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