An international examination of the economic effectiveness of banking recapitalization

Abstract

While the literature on capital adequacy and bank recapitalization agrees on the importance of a minimum capital requirement, recurring financial crises across the world do little to suggest that capital adequacy is enough protection for banks, even when they fully comply. By examining the case of regulation compelled banking recapitalizations in a crosscountry context (during the period 1990Q1 to 2016Q2), we scrutinize the effectiveness of banking recapitalization on the economies of recently recapitalized countries. We provide implications for international business research, practice and policy by highlighting the need for countries adopting the Basel capital adequacy framework to pay attention to the peculiarities of their economies, the supporting regulatory mechanisms and their comparative spare capacities.

Credit information sharing and bank loan pricing: Do concentration and governance matter?

“…We extend the existing literature by exploring these hypotheses further. With African countries characterized by low banking depth and breadth (Fosu, 2014; Tahir, Adegbite, & Guney, 2016), credit information sharing remains one of the substantial issues that impact on lending decisions. However, on the whole, research on information sharing in this context is scant to date.…”

Financial sector transparency, financial crises and market power: Across‐countryevidence

“…Bank capital measures capital adequacy which is understood as a ratio of required capital to risk-weighted total assets. Following the literature on capital requirement and recapitalization (Poczter, 2016;Tahir, Adegbite and Guney, 2017; Deli and Hassan, 2017), increased bank capital results into improved bank client confidence and running of banks, leading to increased banking activities. That is, the increased banking activities lead to more competition and hence reduced market power and dominance of banks.…”

Corporate Social Responsibility as Obligated Internalisation of Social Costs

“…Where law is instrumental, corporations may make decisions to act in ways, which frustrate the regulatory goal, even if they formally comply with the regulation in question. The Basel II Revised International Capital Framework for Banks is a good example of this, with inancial corporations complying with the rules about capital, but doing it in a way that moves assets and liabilities of balance sheet, thus frustrating the primary aim of the regulation, which was to control risk-taking (Tahir et al 2017). They did this because the rules threatened their goal and other decisions linked to it-namely producing shareholder value.…”