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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), Constantin Zopounidis (School of Production Engineering and Management, Technical University of Crete, Greece & Audencia Business School, France)and Kyriaki Kosmidou (Aristotle University of Thessaloniki, Greece)
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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