Bank risk-taking and legal origin: What do we know about dual banking economies?

Mohsin Ali, Nafis Alam, Mudeer Ahmed Khattak, Wajahat Azmi

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5 Citations (Scopus)


This paper investigates the relationship between legal origin and banks’ risk-taking be-havior. We employ GMM to study a sample of both Islamic and conventional banks from 14 dual banking economies from 2005–2018. Our findings can be summarized as follows: (a) bank risk-taking and legal origin are negatively related in our sample countries, (b) Islamic banks are more stable in English law (common) countries, and (c) bank regulations have a differential effect on Islamic and the conventional banks. Our overall findings align with the dark side of the legal framework, indicating a robust legal framework to encourage bank risk-taking. The results have several implications for shareholders, regulators, and other key stakeholders.

Original languageEnglish
Article number224
Number of pages13
JournalJournal of Risk and Financial Management
Issue number5
Publication statusPublished - May 2022


  • bank risk-taking
  • dual banking economies
  • Islamic banks
  • legal origin

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