Nexus between bank capital and risk-taking behaviour: Empirical evidence from US commercial banks

The study aims to investigate the effect of conventional capital ratio, risk-based capital ratio, and capital buffer ratio on commercial bank risk-taking over the period from 2002 to 2019 using a two-step GMM method. The finding reveals that there is a positive relationship between traditional capit...

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Autores principales:	Faisal Abbas, Shoaib Ali, Syed Moudud-Ul-Huq, Muhammad Naveed
Formato:	article
Lenguaje:	EN
Publicado:	Taylor & Francis Group 2021
Materias:	traditional capital ratio risk-based capital ratio capital buffer ratio Business HF5001-6182 Management. Industrial management HD28-70
Acceso en línea:	https://doaj.org/article/003c2aecb0524161a6eaea2454baa206
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spelling	oai:doaj.org-article:003c2aecb0524161a6eaea2454baa2062021-12-02T18:17:07ZNexus between bank capital and risk-taking behaviour: Empirical evidence from US commercial banks2331-197510.1080/23311975.2021.1947557https://doaj.org/article/003c2aecb0524161a6eaea2454baa2062021-01-01T00:00:00Zhttp://dx.doi.org/10.1080/23311975.2021.1947557https://doaj.org/toc/2331-1975The study aims to investigate the effect of conventional capital ratio, risk-based capital ratio, and capital buffer ratio on commercial bank risk-taking over the period from 2002 to 2019 using a two-step GMM method. The finding reveals that there is a positive relationship between traditional capital ratio and risk-taking for the full sample results, which is supported by the regulatory hypothesis. The results are same across various categories based on capitalization and liquidity. Whereas the relationship is negative when capital is measured through risk-based capital ratio and capital buffer, the results are in line with the moral hazard hypothesis. The outcomes are consistent for all subcategories other than for well-capitalized and low liquid banks. The full sample findings are consistent when risk is proxied through loan loss provision. The impact of capital ratios on risk-taking in the pre-, pro- and post-crisis eras is heterogeneous and ‎significant. The findings have significant insights for regulators to observe the differences among pre-, pro- and post-crisis periods for the well, adequately, under, significantly under-capitalized, high and low liquid insured commercial banks of the USA.Faisal AbbasShoaib AliSyed Moudud-Ul-HuqMuhammad NaveedTaylor & Francis Grouparticletraditional capital ratiorisk-based capital ratiocapital buffer ratioBusinessHF5001-6182Management. Industrial managementHD28-70ENCogent Business & Management, Vol 8, Iss 1 (2021)
institution	DOAJ
collection	DOAJ
language	EN
topic	traditional capital ratio risk-based capital ratio capital buffer ratio Business HF5001-6182 Management. Industrial management HD28-70
spellingShingle	traditional capital ratio risk-based capital ratio capital buffer ratio Business HF5001-6182 Management. Industrial management HD28-70 Faisal Abbas Shoaib Ali Syed Moudud-Ul-Huq Muhammad Naveed Nexus between bank capital and risk-taking behaviour: Empirical evidence from US commercial banks
description	The study aims to investigate the effect of conventional capital ratio, risk-based capital ratio, and capital buffer ratio on commercial bank risk-taking over the period from 2002 to 2019 using a two-step GMM method. The finding reveals that there is a positive relationship between traditional capital ratio and risk-taking for the full sample results, which is supported by the regulatory hypothesis. The results are same across various categories based on capitalization and liquidity. Whereas the relationship is negative when capital is measured through risk-based capital ratio and capital buffer, the results are in line with the moral hazard hypothesis. The outcomes are consistent for all subcategories other than for well-capitalized and low liquid banks. The full sample findings are consistent when risk is proxied through loan loss provision. The impact of capital ratios on risk-taking in the pre-, pro- and post-crisis eras is heterogeneous and ‎significant. The findings have significant insights for regulators to observe the differences among pre-, pro- and post-crisis periods for the well, adequately, under, significantly under-capitalized, high and low liquid insured commercial banks of the USA.
format	article
author	Faisal Abbas Shoaib Ali Syed Moudud-Ul-Huq Muhammad Naveed
author_facet	Faisal Abbas Shoaib Ali Syed Moudud-Ul-Huq Muhammad Naveed
author_sort	Faisal Abbas
title	Nexus between bank capital and risk-taking behaviour: Empirical evidence from US commercial banks
title_short	Nexus between bank capital and risk-taking behaviour: Empirical evidence from US commercial banks
title_full	Nexus between bank capital and risk-taking behaviour: Empirical evidence from US commercial banks
title_fullStr	Nexus between bank capital and risk-taking behaviour: Empirical evidence from US commercial banks
title_full_unstemmed	Nexus between bank capital and risk-taking behaviour: Empirical evidence from US commercial banks
title_sort	nexus between bank capital and risk-taking behaviour: empirical evidence from us commercial banks
publisher	Taylor & Francis Group
publishDate	2021
url	https://doaj.org/article/003c2aecb0524161a6eaea2454baa206
work_keys_str_mv	AT faisalabbas nexusbetweenbankcapitalandrisktakingbehaviourempiricalevidencefromuscommercialbanks AT shoaibali nexusbetweenbankcapitalandrisktakingbehaviourempiricalevidencefromuscommercialbanks AT syedmoududulhuq nexusbetweenbankcapitalandrisktakingbehaviourempiricalevidencefromuscommercialbanks AT muhammadnaveed nexusbetweenbankcapitalandrisktakingbehaviourempiricalevidencefromuscommercialbanks
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Nexus between bank capital and risk-taking behaviour: Empirical evidence from US commercial banks

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