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Leverage, performance and capital adequacy ratio in Taiwan's banking industry

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  • Ho, Shirley J.
  • Hsu, Su-Chu
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    Abstract

    We examine the relation between firms' financial structures and their risky investment strategies in Taiwan's banking industry. Regressions cover two subperiods: before the first financial reform (1996-2000) and after the first financial reform (2001-2006), to address the impacts of the first financial reform on banking firms' financial structures. Our first result demonstrates that the restrictions on CAR have indeed affected firms' risky investment strategies, as market share and leverage are positively related. Second, the firm performance is significantly and positively related to firm size, leverage and financial cost. Finally, the regression results show that financial structures for banking firms are positively related to the states of business cycle (i.e., cyclical). The positive signs coincide with Proposition 4 in our analytical model.

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    Bibliographic Info

    Article provided by Elsevier in its journal Japan and the World Economy.

    Volume (Year): 22 (2010)
    Issue (Month): 4 (December)
    Pages: 264-272

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    Handle: RePEc:eee:japwor:v:22:y:2010:i:4:p:264-272

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    Web page: http://www.elsevier.com/locate/inca/505557

    Related research

    Keywords: Bankruptcy Capital adequacy ratio Financial structure Early withdrawals Oligopoly;

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    Cited by:
    1. Ahmad Aref Almazari, 2013. "Capital Adequacy, Cost Income Ratio and the Performance of Saudi Banks (2007-2011)," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 3(4), pages 284-293, October.

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