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Dynamics of bank capital ratios and risk-taking: Evidence from US commercial banks.
- Source :
- Cogent Economics & Finance; Jan2020, Vol. 8 Issue 1, p1-20, 20p
- Publication Year :
- 2020
-
Abstract
- This study aims to explore how different capital ratios influence the risk-taking of large commercial banks of the USA. The study collects the data from FDIC for commercial banks from 2003 to 2019. We use a two-step GMM method to manage the endogeneity, simultaneity, heteroscedasticity, and auto-correlations issue. The findings conclude that an increase in the risk-based capital ratios decreases the banks' risks. Empirical findings demonstrated a significant and positive association between non-risk-based capital ratios and bank risk-taking. The findings also demonstrate that an increase in capital buffer ratios decreases the banks' risks. The impact of capital ratios on risk-taking is heterogeneous for well and under-capitalized banks. The findings suggest that State-chartered member and non-member banks are inclined to take a higher risk than nationally chartered banks. The findings have implications for regulators to consider the State-chartered member, non-member, and nationally chartered banks while formulating the new guidelines for required capital ratios. [ABSTRACT FROM AUTHOR]
- Subjects :
- BANK capital
BANKING industry
FINANCIAL risk
HETEROSCEDASTICITY
EVIDENCE
Subjects
Details
- Language :
- English
- ISSN :
- 23322039
- Volume :
- 8
- Issue :
- 1
- Database :
- Complementary Index
- Journal :
- Cogent Economics & Finance
- Publication Type :
- Academic Journal
- Accession number :
- 148481512
- Full Text :
- https://doi.org/10.1080/23322039.2020.1838693