Capital regulation and ownership structure on bank risk
Purpose – This paper aims to examine the impact of capital regulation, ownership structure and the degree of ownership concentration on the risk of commercial banks. Design/methodology/approach – This study uses a sample of 565 commercial banks from 52 countries over the period of 2011-2015. A dy...
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| Main Authors: | , |
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| Format: | Article |
| Language: | English English |
| Published: |
Emerald Publishing Limited
2019
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| Subjects: | |
| Online Access: | http://irep.iium.edu.my/75363/2/75363%20-%20Capital%20regulation%20and%20ownership%20structure%20on%20bank%20risk-%20Accepted%20version.pdf http://irep.iium.edu.my/75363/8/75363_Capital%20regulation%20and%20ownership%20structure%20on%20bank%20risk_Scopus.pdf http://irep.iium.edu.my/75363/ https://www.emerald.com/insight/publication/issn/1358-1988 https://doi.org/10.1108/JFRC-02-2019-0015 |
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| Summary: | Purpose – This paper aims to examine the impact of capital regulation, ownership structure and the degree
of ownership concentration on the risk of commercial banks.
Design/methodology/approach – This study uses a sample of 565 commercial banks from 52 countries
over the period of 2011-2015. A dynamic panel data model estimation using the maximum likelihood with
structural equation modelling (SEM) was followed considering the panel nature of this study.
Findings – The study found that the increase of capital ratio decreases bank risk and the regulatory
pressure increases the risk-taking of the bank. No statistically significant relationship between banks’
ownership structure and risk-taking was found. The concentration of ownership was found negatively
associated with bank risk. Finally, the study found that in the long term, bank increases the capital level that
decreases the default risk.
Originality/value – This study presents an empirical analysis on the global banking system focusing on the
Basel Committee member and non-member countries that reflect the implementation of Basel II and Basel III.
Therefore, it helps fill the gap in the banking literature on the effect of recent changes in the capital regulation on
bank risk. Maximum likelihood with SEM addresses the issue of endogeneity, efficiency and time-invariant
variables. Moreover, this study measures the risk by different proxy variables that address total, default and
liquidity risks of the banks. Examining from a different perspective of riskmakes the study more robust. |
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