Financial Innovation, Basel Accord III, and Bank Value

Mu-Shun Wang

Emerging Markets Finance and Trade, 2014, vol. 50, issue 2S, 23-42

Abstract: I examine how financial innovation and Basel III capital requirements in Taiwan respond differently to banking crises and market competition. My panel data set comprises data from thirty-four banks for 2000-2012. I find a significant negative relationship between derivatives and the value of a bank and significant positive relationships among the capital adequacy ratio, bank-specific variables, and the value of a bank. Larger bank size and operational diversification tend to be positively associated with a bank's value, the holding of a relatively high amount of capital requirements, and nonperforming loans that are large. The latter result may simply reflect the scale of economy and improvement of efficiency in terms of financial innovation in the banking sector.

Keywords: bank-specific variables; Basel III; capital adequacy ratio; financial innovation; panel data (search for similar items in EconPapers)
Date: 2014
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