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Article

Can Higher Capital Discipline Bank Risk: Evidence from a Meta-Analysis

1
University of Economics—The University of Danang, Danang 55000, Vietnam
2
University of Foreign Language Studies—The University of Danang, Danang 55000, Vietnam
3
Ho Chi Minh National Academy of Politics—Region III, Danang 55000, Vietnam
*
Author to whom correspondence should be addressed.
J. Risk Financial Manag. 2019, 12(3), 134; https://doi.org/10.3390/jrfm12030134
Received: 23 July 2019 / Revised: 15 August 2019 / Accepted: 15 August 2019 / Published: 20 August 2019
(This article belongs to the Special Issue Commercial Banking)
Capital regulation has been among the most important tools for regulators to maintain the credibility and stability of the financial systems. However, the question whether higher capital induce banks to take lower risk remains unanswered. This paper examines the effect of capital on bank risk employing a meta-analysis approach, which considers a wide range of empirical papers from 1990 to 2018. We found that the negative effect of bank capital on bank risk, which implies the discipline role of bank capital, is more likely to be reported. However, the reported results are suffered from the publication bias due to the preference for significant estimates and favored results. Our study also shows that the differences in the previous studies’ conclusions are primarily caused by the differences in the study design, particularly the risk and capital measurements; the model specification such as the concern for the dynamic of bank risk behaviors, the endogeneity of the capital and unobserved time fixed effects; along with and the sample characteristics such as the sample size, and whether banks are bank holding companies or located in high-income countries. View Full-Text
Keywords: bank capital; bank risk; meta-analysis; Bayesian model-averaging; capital regulation bank capital; bank risk; meta-analysis; Bayesian model-averaging; capital regulation
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MDPI and ACS Style

Nguyen, Q.T.T.; Nguyen, S.T.B.; Nguyen, Q.V. Can Higher Capital Discipline Bank Risk: Evidence from a Meta-Analysis. J. Risk Financial Manag. 2019, 12, 134. https://doi.org/10.3390/jrfm12030134

AMA Style

Nguyen QTT, Nguyen STB, Nguyen QV. Can Higher Capital Discipline Bank Risk: Evidence from a Meta-Analysis. Journal of Risk and Financial Management. 2019; 12(3):134. https://doi.org/10.3390/jrfm12030134

Chicago/Turabian Style

Nguyen, Quang T.T., Son T.B. Nguyen, and Quang V. Nguyen 2019. "Can Higher Capital Discipline Bank Risk: Evidence from a Meta-Analysis" Journal of Risk and Financial Management 12, no. 3: 134. https://doi.org/10.3390/jrfm12030134

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