The role of strategic interactions in risk-taking behavior: A study from asset growth perspective

Does prudential capital reduce bank risk-taking? Empirical evidence from the Indonesian banks industry

“…Issues on the connection between bank capitalization and risk-taking emerge every period, primarily when the business cycle occurs remarkably. Most studies estimate the determinants of bank risk-taking, which focus on asset measurements such as the total or size and the adequacy effect (Andries et al, 2020;Broll et al, 2018;Das & Rout, 2020;Kosenko & Michelson, 2022;Le et al, 2022;Mateev et al, 2021;Noman et al, 2017). It merely shows that the studies focused on the effect of prudential capital are scarce.…”

“…Das & Rout (2020) found an affirmative correlation involving bank risk activity and adequacy of capital. Anginer et al (2021), Illueca et al (2022), Mateev et al (2021), Le et al (2022), and Son et al (2022) show a positive correlation between equity ratio on the financial stability of commercial banks or adversely affects bank risk-taking. However, they generally utilized risk-based and non-risk-based capital requirements to examine how market capitalization affected bank risk-taking.…”

“…To the best of our knowledge, we clearly ensure that our study is the first comprising different group of banks in the case of risk-taking analysis in Indonesia. Second, other studies use a non-riskadjusted capitalization ratio such as Anginer et al (2021), Das & Rout (2020), Illueca et al (2022), Mateev et al (2021), Le et al (2022), andSon et al (2022), while we employ both risk-adjusted capitalization ratios and prudential capital buffers to cover the implementation of macroprudential policy instruments. Third, we also contribute to extending the capital buffer ratio by adding regulatory capital pressure to provide a deeper capitalization analysis for specific domestic-systemically important banks (D-SIB) regulations.…”

Bank lending behaviour and macroeconomic factors: A study from strategic interaction perspective

“…The statistically significant lagged values help identify how many lags should be included in the System GMM model ( Li et al., 2021 ). We assume that all macroeconomic factors (GDP growth rate and Inflation rate) are treated as exogenous since “their changes are unexplained by the model, and banks anticipate the full scale of the macroenvironment” ( Le et al., 2022 ). We follow Delis and Kouretas (2011) and suggest that both policy interest rates and loan growth are endogenous.…”

Off-balance sheet business development and bank efficiency: A financial innovation matching perspective

“…Concerning previous bank studies, this paper selects several micro characteristics and macro fundamental variables that may be relevant to efficiency. The micro characteristic variables are total assets [ 91 ], deposit-to-loan ratio [ 26 ], return on average assets [ 4 ], liquidity ratio [ 92 ], and non-performing loan ratio [ 93 ]. The macro fundamental variable is the economic cycle [ 30 ].…”