The Role of Risk Management in Shaping Investment Patterns in Commercial Banks

Abstract

This paper examines the significance of risk management in determining the investment behavior of commercial banks, specifically in credit risk management, market risk management, and liquidity risk management. Using a quantitative research design with an explanatory approach, this study used a structured questionnaire for data collection from 320 banking professionals. These participants were chosen from commercial banks and were actively involved in risk management and investment functions. To establish the validity of the study, the data were tested for reliability, correlations, and multiple regressions. Findings from this study reveal that risk management activities play an important role in determining investment behavior in commercial banks. All dimensions of risk management were found to be positively correlated with investment patterns, thus establishing the fact that risk management approaches play an increasingly significant role in investment decision-making in the current scenario. Liquidity risk management played an important part in this study, thus indicating the significant influence of regulatory requirements in determining investment behavior.