Original scientific paper
https://doi.org/10.1080/1331677X.2020.1763823
How do large commercial banks adjust capital ratios: empirical evidence from the US?
Faisal Abbas
Omar Masood
Abstract
This research explores the balanced panel data to examine the
level of capital adjustment for major insured commercial banks
over the 2002-2018 period using a two-step GMM estimator. The
findings show that the speed of adjustment of the large insured
commercial banks is faster than that of non-financial companies.
The results contribute to a slower average adjustment pace of a
total capital ratio than the total risk-based capital and capital buffer
ratios. The adjustment of capital is faster in the post-crisis
period than during and before-crises era. The adequately capitalized
banks adjust capital ratio faster than well-capitalized banks.
In contrast, the under-capitalized banks adjust the total risk-based
capital ratio and capital buffer ratio more quickly than that of
others. The low liquid banks needed a higher time to restore
equilibrium than high liquid banks. The results of this study have
economic significance for policy implications and future
regulations.
Keywords
Total capital ratio; total risk-based capital ratio; capital buffer ratio
Hrčak ID:
254509
URI
Publication date:
9.2.2021.
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