Bank Capital: Lessons from the Financial Crisis

Asli Demirguc‐kunt, Enrica Detragiache () and Ouarda Merrouche
Authors registered in the RePEc Author Service: Asli Demirguc-Kunt

Journal of Money, Credit and Banking, 2013, vol. 45, issue 6, 1147-1164

Abstract: Using a multicountry panel of banks, we study whether better capitalized banks experienced higher stock returns during the financial crisis. We differentiate among various types of capital ratios: the Basel risk‐adjusted ratio, the leverage ratio, the Tier 1 and Tier 2 ratios, and the tangible equity ratio. We find several results: (i) before the crisis, differences in capital did not have much impact on stock returns; (ii) during the crisis, a stronger capital position was associated with better stock market performance, most markedly for larger banks; (iii) the relationship between stock returns and capital is stronger when capital is measured by the leverage ratio rather than the risk‐adjusted capital ratio; (iv) higher quality forms of capital, such as Tier 1 capital and tangible common equity, were more relevant.

Date: 2013
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Citations: View citations in EconPapers (86)

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https://doi.org/10.1111/jmcb.12047

Related works:
Journal Article: Bank Capital: Lessons from the Financial Crisis (2013)
Working Paper: Bank Capital: Lessons From the Financial Crisis (2010)
Working Paper: Bank capital: lessons from the financial crisis (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:45:y:2013:i:6:p:1147-1164

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