Bank capital and lending: An analysis of commercial banks in the United States

Abstract

This paper empirically evaluates the impact of bank capital on lending patterns of commercial banks in the United States. We construct an unbalanced quarterly panel of around seven thousand medium sized commercial banks over sixty quarters, from 1996 to 2010. Using two different measures of capital namely the capital adequacy ratio and tier 1 ratio, we find a moderate relationship between bank equity and lending. We also use an innovative instrumenting methodolgy which helps us overcome the endogeneity issues that are common in such analyses. Our results are broadly consistent with some other recent studies that have analyzed US banking data.JEL Codes: G21, G28, G32

Nonlinear linkages between bank asset quality and profitability: evidence from dynamic and quantile approaches using a global sample

“…To address our main research question-whether a nonlinear relationship exists between profitability and NPLs-the following panel data model is constructed, which takes into IJMF 18,3 account internal factors, as well as external macroeconomic factors (see Table for definitions of the variables and their expected signs, suggested by previous studies, such as Dimitrios et al, 2016;Ghosh, 2015;Karmakar and Mok, 2015;Makri et al, 2014):…”

“…Our explanatory variables include internal bank factors and macroeconomic factors. 2, with their proxies and the expected signs (Bertay et al, 2015;Karmakar and Mok, 2015). The first lag of all internal variables is taken, as effects are expected to be reflected in future performance (Louzis et al, 2012).…”

Essays in Financial Macroeconomics: Corporate Debt, Systemic Risk and Macrofinancial Stability

“…The selected threshold of 5% for ER min is between the rather low requirements of Basel III and the average capitalization of large US banks. The evolving distribution of capital-to-asset ratios is in this way in the range of US commercial banks, as described by Karmakar and Mok (2015) (see appendix B.4). For the maximum firm leverage ratio we refer to Hovakimian et al (2001) and Graham et al (2015b).…”

“…However, it should be noted that the data set by Karmakar and Mok (2015) does not contain non-commercial banks. Such a delicate subdivision of the banking sector is not possible in the model.…”

“…The left panel, figure B.1a, was created based on a randomly selected path with a securitization intensity of 1% and 10%. The right panel, figure B.1b shows the corresponding descriptive density distribution of US commercial banks according to the data set exploited byKarmakar and Mok (2015).…”