Document Type

Article

Source of Publication

Journal of Applied Economics

Publication Date

1-1-2021

Abstract

Using GMM framework on the data of the US commercial banks spanning over 2002 to 2018, this study shows that banks adjust their regulatory capital ratios faster than traditional capital ratios. Our results show that the speed of adjustment of regulatory capital ratios and traditional capital ratios increases in bank capital adequacy and bank liquidity, respectively. We also find that the speed of adjustment of regulatory capital ratios of too-big-to-fail banks is lower than well-capitalized, adequately-capitalized, nationally-chartered, and state-chartered banks. In addition, the speed of adjustment of regulatory capital ratios of commercial banks is higher in the post-crisis period than the pre-crisis era. Although scholars suggest that adjustment of capital ratios through rebalancing liabilities is more beneficial to the banks, our findings show that banks also use their assets side of balance sheet to rebalance their capital ratios.

ISSN

1514-0326

Publisher

Informa UK Limited

Volume

24

First Page

71

Last Page

90

Disciplines

Business

Keywords

bank charters, Capital ratio, regulatory ratio, speed of capital adjustment, tier-I ratio

Scopus ID

85102290246

Creative Commons License

Creative Commons Attribution-NonCommercial 4.0 International License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Indexed in Scopus

yes

Open Access

yes

Open Access Type

Gold: This publication is openly available in an open access journal/series

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