Does better capitalization enhance bank efficiency and limit risk taking? Evidence from ASEAN commercial banks

Do Van Anh,

Global Finance Journal, 2022, vol. 53, issue C

Abstract: This paper assesses the dynamic causal relationships among bank risk, capital, and efficiency. Using a panel dataset of commercial banks in five ASEAN countries from 2005 to 2015, we employ panel vector autoregression analysis to take into account the endogeneity and interdependencies of these three variables while holding other shocks constant. We find that in general, better capitalized banks in ASEAN countries are more efficient and take less credit risk. However, high-efficiency banks tend to maintain low levels of capital, whereas low-efficiency banks have higher capital ratios. We also analyze the sensitivity of the relationships among capital, risk, and efficiency to ownership structure, bank size, and the periods before and after the 2008 crisis.

Keywords: Bank capital; Bank risk; Bank efficiency; Pane VAR; Causality (search for similar items in EconPapers)
JEL-codes: D22 D24 G21 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:53:y:2022:i:c:s1044028321000156

DOI: 10.1016/j.gfj.2021.100617

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