Risk-based Capital, Portfolio Risk, and Bank Capital: A Simultaneous Equations Approach
Document Type
Article
Keywords
Risk-based capital; Capital ratios; Portfolio risk
Publisher
Elsevier
Abstract
This paper examines the impact the risk-based capital standards had on bank capital and portfolio risk during the first year the risk-based standards were in effect. To date, insufficient attention has been focused on how the risk-based capital standards have impacted bank capital and risk. Building on previous research, this study used a three-stage least squares (3SLS) model to analyze the relationship between bank capital, portfolio risk, and the risk-based capital standards. The results suggest that the risk-based capital standards were effective in increasing capital ratios and reducing portfolio risk in commercial banks.
COinS
Comments
Published by Elsevier in the Journal of Economics and Business, volume 49 issue 6, 1997. Bryant users may access this article here.