721
Views
20
CrossRef citations to date
0
Altmetric
Articles

Risk-Taking Behavior and Capital Adequacy in a Mixed Banking System: New Evidence from Malaysia Using Dynamic OLS and Two-Step Dynamic System GMM Estimators

, , &

References

  • Aggarwal, R., and K. Jacques. 1998. A simultaneous equation estimation of the impact of prompt corrective action on bank capital and risk. Paper presented at Financial Services at the Crossroads: Capital Regulation in the 21st Century, Federal Reserve Bank, New York, pp. 23–32.
  • Arellano, M., and S. Bond. 1991. Some tests for specification for panel data: Monte Carlo evidence and an application to employment equations. Reviews of Economic Studies 58:277–297. doi:10.2307/2297968.
  • Arellano, M., and O. Bover. 1995. Another look at the instrumental variable estimation of error component models. Journal of Econometrics 68:29–51. doi:10.1016/0304-4076(94)01642-D.
  • Bank Negara Malaysia Monthly Statistical Bulletin. 2013. http://www.bnm.gov.my/
  • Berger, A. N., and G. F. Udell. 1994. Did risk-based capital allocate bank credit and cause “credit crunch” in the US? Journal of Money, Credit and Banking 26 (3):585–628. doi:10.2307/2077994.
  • Blum, J. 1999. Do capital adequacy requirements reduce risks in banking? Journal of Banking and Finance 23:755–771. doi:10.1016/S0378-4266(98)00113-7.
  • Blundell, R., and S. Bond. 1998. Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics 87 (1):115–143. doi:10.1016/S0304-4076(98)00009-8.
  • Çizakça, M. 2014. Risk sharing and risk shifting: An historical perspective. Borsa Istanbul Review 14 (4):191–195. doi:10.1016/j.bir.2014.06.001.
  • Delis, M. D., and G. P. Kouretas. 2011. Interest rates and bank risk taking. Journal of Banking and Finance 35:840–855. doi:10.1016/j.jbankfin.2010.09.032.
  • Dewatripont, M., and J. Tirole 1994. A theory of debt and equity: Diversity of securities and manager-shareholder congruence. The Quarterly Journal of Economics 109 (4):1027–1054.
  • Ediz, T., L. Michael, and W. Perraudin. 1998. Bank capital dynamics and regulatory policy. Paper presented at Financial Services at the Crossroads: Capital Regulation in the 21st Century, Federal Reserve Bank, New York, pp. 15–22.
  • Engle, R. F., and C. W. J. Granger. 1987. Cointegration and error correction: Representation, estimation and testing. Econometrica 55:251–276. doi:10.2307/1913236.
  • Francis, W. B., and M. Osborne. 2012. Capital Requirements and bank behavior in the UK: Are there lessons for international capital standards? Journal of Banking & Finance 36:803–816. doi:10.1016/j.jbankfin.2011.09.011.
  • Imam, P., and K. Kpodar. 2013. Islamic banking: How has it expanded? Emerging Markets Finance and Trade 49 (6):112–137. doi:10.2753/REE1540-496X490607.
  • Ioannidou, V. P., S. Ongena, and J. L. Pedro., 2009. Monetary policy, risk taking and pricing: Evidence from a quasi natural experiment, Centre Discussion paper, No.2009-31S.
  • Iqbal, Z., and A. Mirakhor. 2007. An Introduction to Islamic Finance. Singapore: John Wiley and Sons (Asia) Pty Ltd.
  • Jacques, K., and K. Nigro. 1997. Risk based capital, portfolio risk and bank capital: A simultaneous equations approach. Journal of Economics and Business 49:533–547. doi:10.1016/S0148-6195(97)00038-6.
  • Jeitschko, T. D., and S. D. Jeung. 2005. Incentive for risk taking in banking – A unified approach. Journal of Banking and Finance 29:759–777. doi:10.1016/S0378-4266(04)00057-3.
  • Jiminez, G., S. Ongena, J. L. Pedro., and J. Saurina. 2014. Hazardous times for monetary policy: What do twenty-three million bank loans say about the effects of monetary policy on credit risk-taking? Econometrica 82 (2):463–505. doi:10.3982/ECTA10104.
  • Jokipii, T., and A. Milner. 2011. Bank capital buffer and risk adjustment decisions. Journal of Financial Stability 7:165–178. doi:10.1016/j.jfs.2010.02.002.
  • Kao, C. 1999. Spurious regression and residual based tests for cointegration in panel data. Journal of Econometrics 90:1–44. doi:10.1016/S0304-4076(98)00023-2.
  • Karim, M. A., M. K. Hassan, T. Hassan, and S. Mohamad. 2014. Capital adequacy and lending and deposit behaviors of conventional and Islamic banks. Pacific-Basin Finance Journal 28:58–75. doi:10.1016/j.pacfin.2013.11.002.
  • Konishi, M., and Y. Yasuda. 2004. Factors affecting bank risk taking: Evidence from Japan. Journal of Banking and Finance 28:215–232. doi:10.1016/S0378-4266(02)00405-3.
  • Larson, R., J. Lyhagen, and M. Lothgren. 2001. Likelihood based cointegration tests in heterogeneous panels. Econometrics Journal 4:109–142. doi:10.1111/1368-423X.00059.
  • Lee, -C.-C., and M.-F. Hsieh. 2013. The impact of bank capital on profitability and risk in Asian banking. Journal of International Money and Finance 32:251–281. doi:10.1016/j.jimonfin.2012.04.013.
  • Louati, S., I. G. Abida, and Y. Boujelbene. 2015. Capital adequacy implications on Islamic and non-Islamic bank’s behavior: Does market power matter? Borsa Istanbul Review 15 (3):192–204. doi:10.1016/j.bir.2015.04.001.
  • Masih, R., and A. M. M. Masih. 1996. Stock-Watson dynamic OLS (DOLS) and error correction modeling approaches to estimating long- and short-run elasticities in a demand function: New evidence and Methodological Implications from an application to the demand for coal in mainland China. The Energy Economics 18:315–334. doi:10.1016/S0140-9883(96)00016-3.
  • Ozturkkal, B. 2015. Profit sharing between managers and investors: An experimental investigation. Borsa Istanbul Review 15 (2):106–114. doi:10.1016/j.bir.2015.02.002.
  • Pedroni, P. 1999. Critical values for cointegration tests in heterogeneous panels with multiple regressors. Oxford Bulletin of Economics and Statistics 61 (4):5–49. doi:10.1111/1468-0084.61.s1.14.
  • Pedroni, P. 2000. Fully modified OLS for heterogeneous cointegrated panel? Advances in Econometrics 15:93–130.
  • Rime, B. 2001. Capital Requirements and bank behavior: Empirical evidence for Switzerland. Journal of Banking and Finance 25:789–805. doi:10.1016/S0378-4266(00)00105-9.
  • Saiti, B., O. I. Bacha, and M. Masih. 2014. The diversification benefits from Islamic investment during the financial turmoil: The case for the US-based equity investors. Borsa Istanbul Review 14 (4):196–211. doi:10.1016/j.bir.2014.08.002.
  • Saiti, B., O. I. Bacha, and M. Masih. 2015. Testing the conventional and Islamic financial market contagion: Evidence from wavelet analysis. Emerging Markets Finance and Trade 1–18. doi:10.1080/1540496X.2015.1087784.
  • Shawtari, F. A., B. Saiti, S. H. A. Razak, and M. Ariff. 2015. The impact of efficiency on discretionary loans/finance loss provision: A comparative study of Islamic and conventional banks. Borsa Istanbul Review 15 (4):272–282. doi:10.1016/j.bir.2015.06.002.
  • Shrieves, R. E., and D. Dahl. 1992. The relationship between risk and capital in commercial banks. Journal of Banking and Finance 16:439–457. doi:10.1016/0378-4266(92)90024-T.
  • Stock, J. H., and M. Watson. 1993. A simple estimator of cointegrating vectors in higher order integrated systems. Econometrica 61:783–820. doi:10.2307/2951763.
  • VanHoose, D. 2007. Theories of bank behavior under capital regulation. Journal of Banking and Finance 31:3680–3697. doi:10.1016/j.jbankfin.2007.01.015.
  • Windmeijer, F. 2005. A finite sample correction for the variance of linear efficient two-step GMM estimators. Journal of Econometrics 126 (1):25–51. doi:10.1016/j.jeconom.2004.02.005.
  • Zhang, Z.-Y., J. Wu, and Q. F. Liu. 2008. Impacts of capital adequacy regulation on risk taking behaviors of banking. System Engineering – Theory and Practice 28 (8):183–189. doi:10.1016/S1874-8651(09)60035-1.

Reprints and Corporate Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

To request a reprint or corporate permissions for this article, please click on the relevant link below:

Academic Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

Obtain permissions instantly via Rightslink by clicking on the button below:

If you are unable to obtain permissions via Rightslink, please complete and submit this Permissions form. For more information, please visit our Permissions help page.