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Bank Capital and Lending: An Analysis of Commercial Banks in the United States

Author

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  • Sudipto Karmakar
  • Junghwan Mok

Abstract

This paper empirically evaluates the impact of bank capital on lending patterns of commercial banks in the United States. We construct an unbalanced quarterly panel of around seven thousand medium sized commercial banks over sixty quarters, from 1996 to 2010. Using two different measures of capital namely the capital adequacy ratio and tier 1 ratio, we find a moderate relationship between bank equity and lending. We also use an innovative instrumenting methodology which helps us overcome the endogeneity issues that are common in such analyses. Our results are broadly consistent with some other recent studies that have analyzed US banking data.

Suggested Citation

  • Sudipto Karmakar & Junghwan Mok, 2013. "Bank Capital and Lending: An Analysis of Commercial Banks in the United States," Working Papers w201318, Banco de Portugal, Economics and Research Department.
  • Handle: RePEc:ptu:wpaper:w201318
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    References listed on IDEAS

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    1. repec:eee:mulfin:v:41:y:2017:i:c:p:61-79 is not listed on IDEAS
    2. repec:eee:finana:v:57:y:2018:i:c:p:23-39 is not listed on IDEAS

    More about this item

    JEL classification:

    • 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
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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