| he present research study examined the relationship between performance and risk-taking behavior within the community-banking sector. Risk-taking behavior challenges the commercial banking industry (Hughes & Mester, 2012). Furthermore, risk-taking behavior and performance continues to elicit discussion in finance, strategic management, behavioral economics, and risk & uncertainty literature. The characteristics related to risk-taking behavior among small banks lack in-depth examinations in banking literature, specifically from a behavioral framework perspective. Prospect theory challenges the traditional finance assumptions of expected utility theory (EUT) and provides a testable behavioral framework to predict risk-taking behavior. Therefore, the aim of this study was to gain insight into the influence of performance on risk-taking behavior by testing the applicability of prospect theory. This study utilized a quantitative methodology in a cross-sectional correlation research design to examine the relationship between performance and risk-taking behavior for the period of 1994 through 2014. The sampling frame and data analysis consisted of secondary data for 787 community banks (assets... |
