Are Banking Institution reluctant to realise their losses? – An Irish perspective

Vasudevan, Satviha (2022) Are Banking Institution reluctant to realise their losses? – An Irish perspective. Masters thesis, Dublin, National College of Ireland.

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Abstract

The research examines whether the Irish Banking Institutions have been impacted due to Loss Aversion i.e “the tendency to prefer avoiding losses to acquiring equivalent gains”(The decision lab, 2019). Loss aversion implies that psychologically investors get affected while incurring losses and its more adverse than the happiness investor experiences from a gain. This study looks at the phenomenon of Banking Institutions' loss aversion, which prevents them from issuing new shares to raise capital for running their businesses.

The Secondary method of data collection was adopted to carry forward the research project. The Financial Statement of Irish Banking authorities (Annual Report, 2021) is taken into consideration for a period of three years from 2018 to 2021 in order to analyse the movement in common stock in comparison with the total equity of the company. Three leading Banking institutions of Ireland i.e Allied Irish Bank, Bank of Ireland and Permanent TSB have been studied broadly to understand how the management’s decision making process is influenced by the behavioural aspect known as Loss Aversion.

The research expands and investigates the potential influence of loss aversion in Banking Institutions, particularly during crises like Covid 19 pandemic, which may have indirectly impacted the overall performance of the Banks. The analysis outlines methods in which the losses incurred during crises could have been contained by the management via adequate preparation and the sale of the company's ideal shares.

Issuing loans, bonds, or utilizing retained earnings are some of the ways in which banks raise finance to meet crises-related losses, which requires the payment of high fixed interest rates. Instead, the research shows that the issue of shares might be a potential method for controlling or minimizing crisis-related losses. It was observed that the management’s reluctance to issue further shares may be a result of the anticipation that the share price would rise in the future.

Item Type:	Thesis (Masters)
Subjects:	H Social Sciences > HG Finance > Banking H Social Sciences > HG Finance > Investment > Investment Strategy D History General and Old World > DA Great Britain > Ireland
Divisions:	School of Business > Master of Science in Finance
Depositing User:	Clara Chan
Date Deposited:	26 Oct 2022 12:20
Last Modified:	26 Oct 2022 12:20
URI:	https://norma.ncirl.ie/id/eprint/5832

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