Original scientific paper
https://doi.org/10.1080/1331677X.2021.1890177
The nexus between Basel capital requirements, risktaking and profitability: what about emerging economies?
Ghulam Mujtaba
Yasmeen Akhtar
Saira Ashfaq
Imran Abbas Jadoon
Syeda Mahlaqa Hina
Abstract
The study examines the nexus between Basel capital requirements, banking sector risk-taking, and profitability in Asian emerging markets by using dynamic panel GMM methodology. The
findings of the study suggest that regulatory capital positively
affects risk-taking which validates the “regulatory hypothesis.” The
findings also reveal that regulatory capital positively while risk
negatively affects the profitability in the banking sector. The current study finds the bidirectional causality between the regulatory
capital and risk-taking, implying that banks with higher capital
ratios are expected to increase in risk-taking and vice versa. The
findings also suggest that managerial ownership positively affects
while foreign ownership negatively impacts risk-taking consistent
with the agency theory of corporate governance. The study proposes that ownership structure has a significant influence on
bank risk and profitability, however, the combined impact of
regulatory capital through its interaction with the ownership
structure is not proved to be significant
Keywords
Basel capital requirements; ownership structure; risktaking; profitability; Asian emerging markets
Hrčak ID:
301830
URI
Publication date:
31.3.2023.
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