How do capital ratios affect bank risk-taking: New evidence from the United States
This study aims to examine the impact of different capital ratios on Non-Performing loans, Loan Loss Reserves, and Risk-Weighted Assets by studying large commercial banks of the United States. The study employed a two-step system generalized method of movement (GMM) approach by collecting the data o...
محفوظ في:
| المؤلفون الرئيسيون: | , , , |
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| التنسيق: | مقال |
| منشور في: |
SAGE Publications
2021
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| الموضوعات: | |
| الوصول للمادة أونلاين: | http://eprints.um.edu.my/26498/ |
| الوسوم: |
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| الملخص: | This study aims to examine the impact of different capital ratios on Non-Performing loans, Loan Loss Reserves, and Risk-Weighted Assets by studying large commercial banks of the United States. The study employed a two-step system generalized method of movement (GMM) approach by collecting the data over the period ranging from 2002 to 2018. The study finds that using Non-Performing loans and Loan Loss Reserves as a proxy for risk, results support moral hazard hypothesis theory, whereas the results support regulatory hypothesis theory when Risk-Weighted Assets is used as a proxy for risk. The results confirm that the influence of high-quality capital on Non-Performing loans, Loan Loss Reserves, and Risk-Weighted Assets is substantial. The distinctive signs of Non-Performing loans, Loan Loss Reserves, and Risk-Weighted Assets have indications for policymakers. The results are intimate for formulating new guidelines regarding risk mitigation to recognize Non-Performing loans and Loan Loss Reserves and the Risk-Weighted Assets for better results. JEL Classification: G21, G28, G29 |
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