scholarly journals The Impact of Regulatory Capital on Risk Taking By Pakistani Banks

2019 ◽  
Vol 2 (2) ◽  
pp. 94-103 ◽  
Author(s):  
Muhammad Sajjad Hussain ◽  
Dr. Muhammad Muhaizam Musa ◽  
Dr. Abdelnaser Omran
Keyword(s):  
Developing Countries ◽  
Risk Taking ◽  
Implementation Process ◽  
Policy Implications ◽  
Capital Regulation ◽  
Regulatory Capital ◽  
Minimum Capital ◽  
Capital Ratios ◽  
Capital Regulations ◽  
The Impact

Objective - The objective of this study is to examine the relationship between capital regulation and risk-taking by the banks of Pakistan.  Design - This study was conducted on all the commercial banks of Pakistan and data were collected from the year 2005 to 2016.  Findings - This study concluded the significant positive relationship between regulatory capital and risk-taking by banks in Pakistan. The findings of this study play a key role in the implementation of capital regulations in the banks of developing countries.  Policy Implications - In the light of this study, the regulators must revise their implementation process of the Basel Accord capital regulations in the banks of developing countries. The prime intention of regulators are only on to maintain the minimum capital ratios but must be conscious of other important elements of capital regulation implications.  Originality - This study is one of the first attempts that investigated the crucial role of regulatory capital towards risk-taking in the Pakistani context.

scholarly journals Can accounting rules be made neutral for bank capital regulation?

2012 ◽  
Vol 1 (3) ◽  
pp. 27-35 ◽  
Author(s):  
Guoxiang Song
Keyword(s):  
Accounting Information ◽  
Capital Regulation ◽  
Bank Capital ◽  
Regulatory Capital ◽  
Historical Cost ◽  
Bank Capital Regulation ◽  
Capital Ratios ◽  
Trading Activities ◽  
Accounting Rules ◽  
The Impact

This paper evaluates several methods which can possibly be used to minimize the pro-cyclical impact of accounting rules on bank capital regulation. Improving accounting rules cannot eliminate the pro-cyclicality problem as there cently proposed expected credit loss impairment model for historical cost accounting may be moving towards using information inputs for fair values. Limiting the trading activities accounted for by fair values may reduce the pro-cyclicality. However, it cannot eliminate the impact of fair values in a liquidity crisis. The most effective method is to exclude the unrealized accounting gains or losses from regulatory capital. But it needs a report of capital ratios based on accounting measures to help regulators read the early warning signals emitted by the accounting information.

Risk-based capital regulation revisited: evidence from the early 2000s

2015 ◽  
Vol 23 (2) ◽  
pp. 115-134 ◽  
Author(s):  
Thomas L. Hogan ◽  
Neil R. Meredith ◽  
Xuhao (Harry) Pan
Keyword(s):  
Design Methodology ◽  
Banking Regulation ◽  
Bank Performance ◽  
Capital Regulation ◽  
Data Set ◽  
Content Type ◽  
Future Performance ◽  
Capital Ratios ◽  
Using Data ◽  
Capital Regulations

Purpose – The purpose of this study is to replicate Avery and Berger’s (1991) analysis using data from 2001 through 2011. Although risk-based capital (RBC) regulation is a key component of US banking regulation, empirical evidence of the effectiveness of these regulations has been mixed. Among the first studies of RBC regulation, Avery and Berger (1991) provide evidence from data on US banks that new RBC regulations outperformed old capital regulations from 1982 through 1989. Design/methodology/approach – Using data from the Federal Reserve’s Call Reports, the authors compare banks’ capital ratios and RBC ratios to five measures of bank performance: income, standard deviation of income, non-performing loans, loan charge-offs and probability of failure. Findings – Consistent with Avery and Berger (1991), the authors find banks’ risk-weighted assets to be significant predictors of their future performance and that RBC ratios outperform regular capital ratios as predictors of risk. Originality/value – The study improves on Avery and Berger (1991) by using an updated data set from 2001 through 2011. The authors also discuss some potential limitations of this method of analysis.

Capital regulation, competition and risk-taking behavior of Indian banks in a simultaneous approach

2018 ◽  
Vol 44 (4) ◽  
pp. 459-477 ◽  
Author(s):  
Santi Gopal Maji ◽  
Preeti Hazarika
Keyword(s):  
Human Capital ◽  
Risk Taking ◽  
Value Added ◽  
Capital Adequacy ◽  
Bank Risk ◽  
Capital Regulation ◽  
Content Type ◽  
Risk Taking Behavior ◽  
Indian Banks ◽  
The Impact

Purpose The purpose of this paper is to investigate the association between capital regulation and risk-taking behavior of Indian banks after incorporating the influence of competition. Further, the study intends to enrich the existing literature by providing empirical evidence on the role of human resources in managing risk along with the influence of other bank specific and macroeconomic variables. Design/methodology/approach Secondary data on 39 listed Indian commercial banks are collected from “Capitaline Plus” corporate data database for a period of 15 years. Capital is measured by capital adequacy ratio as defined by the regulators, and two definitions of risk – credit risk and insolvency risk – are employed. Competition is measured by Herfindahl-Hirschman deposits index, concentration ratio and H-statistic. The value-added intellectual coefficient model is employed to compute human capital efficiency (HCE). Three-stage least squares technique in a simultaneous equation framework is used to estimate the coefficients. Findings The study finds that absolute level of regulatory capital and bank risk are positively associated, although the influence of capital on risk is not statistically significant. The influence of competition on risk is negative for all the models, which supports the “competition stability” view. The impact of human capital on bank risk is also negative for all cases. Practical implications The findings of the study are useful for the decision makers in several ways based on the inverse influence of competition and HCE on bank risk. Further, the observed positive association between capital and risk indicates that the capital regulation is not sufficient to enhance the stability in the banking sector. Originality/value This is the first study in the Indian context that incorporates the competition in the banking industry as an explanatory variable in the extant bank capital and risk relationship.

Korea’s Foreign Direct Investment in the Automotive Industry in China

China Report ◽  
2018 ◽  
Vol 54 (2) ◽  
pp. 175-193 ◽  
Author(s):  
Jungmin Lee ◽  
Jai S. Mah
Keyword(s):  
Developing Countries ◽  
Foreign Direct Investment ◽  
Technology Transfer ◽  
Automotive Industry ◽  
Direct Investment ◽  
Policy Implications ◽  
Foreign Firms ◽  
Job Opportunities ◽  
Korean Firm ◽  
The Impact

This article examines the impact of foreign-invested enterprises in the development of China’s automotive industry. It particularly focuses on the case of foreign direct investment (FDI) by a Korean firm, namely, the Hyundai Motor Company, in China. The Chinese government’s policy regarding the automotive industry allowed China’s domestic manufacturers to benefit from technology transfer, as foreign firms were not allowed to invest exclusively in China without a partnership. The contribution of Korea’s investment in China’s automotive industry would comprise the creation of job opportunities, technology transfer and the development of the automobile parts industry. Korea’s investment in the automotive industry of China has policy implications for China and other developing countries trying to expand their technology-intensive industries.

scholarly journals Regulatory Capital is a Panacea for Efficiency, Credit Growth and Reducing Non-Performing Loans in Commercial Banks

2021 ◽  
Vol 16 (2) ◽  
pp. 265-287
Author(s):  
Amina Malik ◽  
◽  
Babar Zaheer Butt ◽  
Shahab Ud Din ◽  
Haroon Aziz ◽  
...  
Keyword(s):  
Commercial Banks ◽  
Financial Statements ◽  
Capital Adequacy ◽  
Regulatory Capital ◽  
Credit Growth ◽  
Minimum Capital ◽  
Capital Adequacy Ratio ◽  
The Impact ◽  
Interest Margin

This study examined the effectiveness of regulatory capital in enhancing efficiency and credit growth and reducing bad loans in commercial banks listed on the Pakistan Stock Exchange (PSX) from 2010 to 2019. Precisely, the impact of capital adequacy ratio (CAR) was studied on net interest margin (NIM), credit growth (CR) and non-performing loans (NPLs). The impact of capital adequacy regulations was assessed by retrieving data from financial statements analysis (FSA), Bank Financial statements and the World Bank website. Panel regression models including ordinary least squares (OLS), fixed and random effects under robust title were applied in this study. Results revealed that the implementation of stringent CAR plays the role of panacea and increases interest margin & credit growth and a reduction of NPL in Pakistani commercial banks. The study provides practical results for regulators to customize regulations on credit growth to reduce non-performing loans and maintain healthy growth of loans by not compromising on interest margins as well as maintenance of minimum capital adequacy ratios. With the high significance of stringent minimum capital adequacy for banks, the findings of the study are valuable for regulators, banks, auditors and investors, as capital adequacy ratio commonly plays the role of Panacea in terms of efficiency, credit growth and reduction in non-performing loans. Keywords: capital adequacy ratio, efficiency, credit growth, non-performing loans

Capital regulation and ownership structure on bank risk

2019 ◽  
Vol 28 (1) ◽  
pp. 39-56 ◽  
Author(s):  
Aysa Siddika ◽  
Razali Haron
Keyword(s):  
Maximum Likelihood ◽  
Ownership Structure ◽  
Risk Taking ◽  
Commercial Banks ◽  
Dynamic Panel Data ◽  
Bank Risk ◽  
Capital Regulation ◽  
Content Type ◽  
Global Banking ◽  
The Impact

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 risk makes the study more robust.

Do government expenditure reduce income inequality: evidence from developing and developed countries

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Noor Zahirah Mohd Sidek
Keyword(s):  
Developing Countries ◽  
Income Inequality ◽  
Driving Forces ◽  
Government Expenditure ◽  
Developed Countries ◽  
Policy Implications ◽  
Content Type ◽  
Positive Effects ◽  
The Impact ◽  
Developing And Developed Countries

Purpose This paper aims to re-examine the impact of government expenditure on income inequality. Existing studies provide mixed results on whether government expenditure reduces or increases income inequality. In this paper, government expenditure is viewed as a tool for redistribution, hence, its impact on inequality is examined. Design/methodology/approach A sample of 122 countries with 91 and 31 countries categorized as developing and developed countries is used. The dynamic panel threshold regression is used to examine the impact of government expenditure on income inequality and to estimate the turning point of the negative or positive effects. Findings The major findings suggest that, in general, government expenditure does reduce income inequality. Results from developed countries support the inversed U-shaped Kuznet curve where higher government expenditure initially led to more inequality but would eventually bring about a positive effect after a certain threshold level. For developing countries, education and development expenditure were the driving forces towards lower income inequality. Practical implications Several policy implications can be derived from this paper. First, government expenditure is a useful tool to alleviate the problem of income inequality. More integration with the global economy via trading activities is also an important channel to help reduce income inequality. Finally, better institutional quality provides an effective ecosystem in promoting better redistribution of income via government expenditure. Originality/value This paper presents a maiden attempt to estimate a threshold value or when government expenditure starts to reduce or increase income inequality. The sample is segregated into developed and developing countries to further control the effect of government size and the level of development of a country.

scholarly journals The Impact of Food Price Crises on the Demand for Nutrients in Pakistan

2016 ◽  
Vol 11 (3) ◽  
pp. 305-327
Author(s):  
Nadia Shabnam ◽  
Fabio Gaetano Santeramo ◽  
Zahid Asghar ◽  
Antonio Seccia
Keyword(s):  
Developing Countries ◽  
Food Security ◽  
Nutritional Status ◽  
Economic Crisis ◽  
Food Price ◽  
Price Increase ◽  
Policy Implications ◽  
Time Varying ◽  
Staple Food ◽  
The Impact

The global economic crisis in 2007–2008 resulted in a tremendous food price increase that is likely to have adversely affected the food security and nutritional status in many developing countries. Understanding how nutritional intakes may have changed as a result of the food price crisis is important, especially for Pakistan, the country under scrutiny which, despite of being a large producer of staple food, suffers from severe problems of undernourishment. We used two survey rounds, 2005–2006 and 2010–2011, to investigate how calorie and macronutrient intakes have evolved. The analysis was carried out with the use of a time varying model and is enriched by an in-depth investigation for different quantiles. The results show that food security deteriorated because of the food price crisis. In the light of this outcome, policy implications are discussed.

scholarly journals Determinants of Foreign Direct Investment in Developed and Developing Countries: Impact of Political Stability

2021 ◽  
Vol 17 (4) ◽  
pp. 1390-1404
Author(s):  
R.I. Vasilyeva ◽  
◽  
O.S. Mariev ◽  
Keyword(s):  
Developing Countries ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Developing Economies ◽  
Political Stability ◽  
Policy Implications ◽  
Likelihood Method ◽  
Developed Economies ◽  
Development Level ◽  
The Impact

Stable political environment and prominent development of political institutions increase foreign direct investment flows by providing lower risks for investors. However, this impact can vary according to the development of the country. This study aims to investigate the impact of various indicators of political stability on foreign direct investment attraction for different economies distinguished by their development level. Our database includes 66 FDI-recipient countries and 98 FDI-investing countries for the period from 2001 to 2018. By applying the gravity approach and Poisson Pseudo Maximum Likelihood method with instrumental variables (IV PPML), we model bilateral FDI flows, incorporating variables reflecting various aspects of political stability formed by the principal components analysis. Interestingly, we found mixed results regarding the impact of political stability on FDI flows. In particular, political stability indicators were found to be insignificant, when analysing the bilateral FDI flows for the group of developed economies. We obtained similar result for the group of developing economies. However, political stability variables significantly influence FDI flows for countries with different development level, confirming the hypothesis that countries’ development affects bilateral FDI flows. Besides, we discover the significant difference between developed and developing countries referring to FDI-investors. Based on the obtained results, we highlight a few policy implications for developing and developed economies.

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