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The relationship between risk and capital in Swiss commercial banks: a panel study

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  • Robert Bichsel
  • Jurg Blum

Abstract

The relationship between changes in risk and changes in leverage for a panel of Swiss banks is investigated. Using market data for risk and both accounting and market data for capital over the period between 1990 and 2002, a positive correlation is found between changes in capital and changes in risk, i.e., higher levels of capital are associated with higher levels of risk. Despite this positive correlation, however, a significant relationship between the default probability and the capital ratio is not found.

Suggested Citation

  • Robert Bichsel & Jurg Blum, 2004. "The relationship between risk and capital in Swiss commercial banks: a panel study," Applied Financial Economics, Taylor & Francis Journals, vol. 14(8), pages 591-597.
    • Handle: RePEc:taf:apfiec:v:14:y:2004:i:8:p:591-597
    DOI: 10.1080/0960310042000233881
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