Institutional flexibility of decision making as a basis for a bank’s investment strategy selection

Economic Annals-XXI: Volume 129, Issue 5-6(1), Pages: 49-52

Citation information:
Laktionova, A., & Zhytar, M. (2013). Institutional flexibility of decision making as a basis for a bank’s investment strategy selection. Economic Annals-XXI, 5-6(1), 49-52. https://ea21journal.world/index.php/ea-v129-13/

Aleksandra Laktionova
PhD (Economics),
Associate Professor,
Donetsk National University, Ukraine
sashalakt@rambler.ru

Maksym Zhytar
Post-Graduate Student,
Donetsk National University, Ukraine
zhytarmaksym@gmail.com

Institutional flexibility of decision making as a basis for a bank’s investment strategy selection

Abstract. Investment strategy is the most important element of the investment policy of the bank in the equity market. The article is devoted to the factors that influence on the choice of the bank’s investment strategy, the most significant of which should include appropriate institutional restrictions formed by the institutional environment. A level of institutional constraints is assessed and an aggregate of institutional constraints is divided into four groups: formal universal, specific formal, informal and indicatively legal restrictions. It is proved that the formal and informal institutional restrictions reduce the field of alternatives in investment decision making and impact ambiguously on the level of the bank’s investment risk. A level of institutional flexibility in the bank’s investment decisions making is estimated on the basis of the institutional restrictions level rating in Ukraine. Results of the study show that as the selection criteria for the investment strategy of the bank on the basis of institutional flexibility may be such indicators as the level of restrictions in relation to certain types of securities, stability of the institutional constraints, and the level of institutional flexibility. These criteria might reasonably be considered early in the development of the Bank’s Investment memorandum which sets out the priorities of the bank’s investment activities and their implementation mechanisms.

Keywords: Institutional Flexibility; Institutional Constraints; the Investment Strategy of the Bank; Decision Making

JEL Classification: G24

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Received 22.04.2013