The role of happiness in bank risk: An international cross-country analysis
This study analyzes global data to reveal that national happiness, via stability and education, significantly reduces bank risk.
What it examines
This study examines the influence of national happiness on bank risk using data from commercial banks in 68 countries (2006--2020). It applies quasi-experimental methods, leveraging events like the Beijing Olympics and Delhi gang rape alongside an instrumental variable approach, to reveal how positive emotions impact financial stability.
What it concludes
The results reveal that higher national happiness significantly reduces bank risk. Political stability and education emerge as key channels. This finding suggests that integrating well-being factors into financial risk assessments can improve policymaking and risk management, and encourages further research on societal emotions and financial stability.
Evidence objects
Study reveals national happiness reduces bank risk, challenging traditional risk management theories by linking positive emotions to safer banking practices with robust data spanning 68 countries between 2006 and 2020.
key_findings bullet 1 · key_findings · validation V0
Researchers harness quasi-experimental techniques and instrumental variables, exploiting natural experiments like the Beijing Olympics and Delhi gang rape to address endogeneity, thereby strengthening causal inference in global financial risk assessment.
key_findings bullet 2 · key_findings · validation V0
The study shows positive emotion, along with political stability and education, shapes bank risk profiles and links emotional well-being with financial stability, thereby prompting expansive research into cultural risk influences.
key_findings bullet 3 · key_findings · validation V0
This paper innovatively links national happiness with bank risk via quasi-experimental methods on a global dataset. It uniquely infuses behavioral finance by integrating sentiment into risk management models. Despite using established econometric techniques, its interdisciplinary perspective and systematic approach yield moderately original, compelling insights that underscore the papers timely relevance.
key_findings bullet 4 · key_findings · validation V0
Raw abstract and provenance
In this paper, we investigate whether and how national happiness influences bank risk. Utilizing a comprehensive global sample of commercial banks from 68 countries, spanning the period from 2006 to 2020, we find that positive emotions, particularly happiness, are significantly linked to reduced bank risk. To address potential endogeneity and establish causal relationships, we employ quasi-experimental designs, leveraging external events such as the Beijing Olympics and the Delhi gang rape, along with an instrumental variable approach. Our mechanism analysis identifies political stability and education as key channels through which happiness affects bank risk. This study sheds light on the interaction between emotions and financial institutions, indicating that positive emotion is a crucial determinant of risk in financial markets and institutions.
Source row: 2000 · abstract type: unknown