Capital Regulation and Credit Risk Taking : Empirical Evidence from Banks in Emerging Market Economies
AbstractThe primary purpose of this article is to investigate the relationship between bank capital and credit risk taking in emerging market economies. We also investigate the influence of several regulatory, institutional and legal features on the relationship between risk and capital. We apply a simultaneous equations framework following Shrieves and Dahl (1992) and Jacques and Nigro (1997). Our results corroborate the existing findings for US and other industrial economies, putting forward the impact of capital regulation on banks’ behavior. We also show empirical evidence on the role of the regulatory, institutional and legal environment in driving bank capitalization and credit risk taking behavior in emerging market economies.
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Date of creation: 08 Sep 2004
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bank capital and risk taking; bank regulation; emerging market economies; regulatory; institutional and legal environment;
Find related papers by JEL classification:
- C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
- F39 - International Economics - - International Finance - - - Other
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
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