Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/270005 
Year of Publication: 
2020
Citation: 
[Journal:] Cogent Economics & Finance [ISSN:] 2332-2039 [Volume:] 8 [Issue:] 1 [Article No.:] 1838693 [Year:] 2020 [Pages:] 1-21
Publisher: 
Taylor & Francis, Abingdon
Abstract: 
This study aims to explore how different capital ratios influence the risk-taking of large commercial banks of the USA. The study collects the data from FDIC for commercial banks from 2003 to 2019. We use a two-step GMM method to manage the endogeneity, simultaneity, heteroscedasticity, and auto-correlations issue. The findings conclude that an increase in the risk-based capital ratios decreases the banks' risks. Empirical findings demonstrated a significant and positive association between non-risk-based capital ratios and bank risk-taking. The findings also demonstrate that an increase in capital buffer ratios decreases the banks' risks. The impact of capital ratios on risk-taking is heterogeneous for well and under-capitalized banks. The findings suggest that State-chartered member and non-member banks are inclined to take a higher risk than nationally chartered banks. The findings have implications for regulators to consider the State-chartered member, non-member, and nationally chartered banks while formulating the new guidelines for required capital ratios.
Subjects: 
capital buffer ratios
risk-based capital ratios
risk-taking
USA
JEL: 
G21
G28
G32
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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