Bank Capital Inflows, Institutional Development and Risk: Evidence from Publicly - Traded Banks in Asia  

Oleh:

Soedarmono, Wahyoe

Jenis: Article from Journal - ilmiah nasional - terakreditasi DIKTI
Dalam koleksi: Bulletin of Monetary Economics and Banking (ex: Buletin Ekonomi Moneter dan Perbankan) vol. 14 no. 2 (Oct. 2011), page 135-150.
Topik: G21; G28; G38
Fulltext: WahyoeSoedarmono_dv.pdf (169.85KB)

Isi artikel

This paper examines the relationship between bank capital inflows and financial stability. Using a sample of publicly-traded commercial banks in Asia over the 2002-2008 period, the empirical results show that higher capital inflows in banking markets measured by the share of foreign liabilities in banking reduces systematic risk, but increases bank-specific risk and total risk. A deeper investigation further suggests that an increase in total risk and bank-specific risk is driven by strong institutional development. Specifically, higher foreign liabilities in banking exacerbate bank-specific risk and total risk in countries with greater economic freedom. Hence, the reinforcement of prudential regulations is necessary to overcome bank-specific risk and total risk, particularly when the countries move to a more liberal economic environment.

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