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Adjustment of Bank Capital Ratios: New Evidence From Commercial Banks
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Author(s): Faisal Abbas (University of Central Punjab, Pakistan)
Copyright: 2023
Volume: 10
Issue: 1
Pages: 15
Source title:
International Journal of Corporate Finance and Accounting (IJCFA)
Editor(s)-in-Chief: Apostolos G. Christopoulos (Department of Business Administration, University of the Aegean, Greece), Kyriaki Kosmidou (Aristotle University of Thessaloniki, Greece)and Constantin Zopounidis (School of Production Engineering and Management, Technical University of Crete, Greece & Audencia Business School, France)
DOI: 10.4018/IJCFA.322552
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Abstract
This study explores the speed of adjustment of the capital ratio, regulatory ratio, and tier-I ratio of commercial banks in China by employing the GMM framework from 2006 to 2020. The empirical analysis reveals that banks adjust their regulatory ratio and tier-I ratio faster than the capital ratio of Chinses commercial banks. The findings report that the pace of regulatory ratio, a tier-I ratio of well-capitalized, highly liquid, and high growth banks are faster than under-capitalized, low liquid and low growth commercial banks in China. In addition, the speed of adjustment of regulatory ratio, the tier-I ratio is faster than capital ratio during the GFC-2008 in China. These findings suggest that the regulators may consider the heterogeneity in the speed of capital adjustment across different bank characteristics to formulate new bank regulations; particularly, when assessing and adjusting the specific capital requirements through Pillar II of the Basel III agreement.
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