Risk and capital adequacy ratio: evidence from Iranian banks (in Persian)

Mohammad Solgi () and Mohammad Talebi ()
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Mohammad Solgi: comprehensive university of imam Hossain
Mohammad Talebi: imam sadegh university

Journal of Monetary and Banking Research (فصلنامه پژوهش‌های پولی-بانکی), 2017, vol. 9, issue 30, 513-543

Abstract: The main purpose of banking regulation is promoting banks resilience in crisis and reducing banks risk. This occurs by the market and regulatory pressure. In this paper, we attempt to investigate the causal relationship between capital adequacy ratio (CAR) and risk, adequacy of capital requirement in controlling risk and explore bankchr('39')s behavior in a different level of capital ratio. Using data of Iranian banks in period of 1389-1394 and simultaneous equation model (SEM), the results show that first, there is mutual causal relationship between risk and capital, second, besides the regulatory pressure, market discipline affect the changes of capital ratio, and finally low-capitalized bank adjust their capital slower than other banks.

JEL-codes: E42 G21 J2 (search for similar items in EconPapers)
Date: 2017
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