How do banks’ capital regulation and risk-taking respond to COVID-19? Empirical insights of ownership structure
International Journal of Islamic and Middle Eastern Finance and Management
; 15(2):406-424, 2022.
Article
in English
| ProQuest Central | ID: covidwho-1794905
ABSTRACT
Purpose>This study aims to investigate the relationship between capital regulation and risk-taking behavior (financial stability) concerning the impacts of the recent global (COVID-19) crisis and diverse ownership structure.Design/methodology/approach>The analysis uses an unbalanced panel data set from 32 commercial banks of Bangladesh for 2000–2020. The authors use the two-step system generalized method of moments and three-stage least squares to produce the study outcomes.Findings>The robust results reveal that the relationship between capital regulation and risk (financial stability) is negative (positive) and bi-directional. More significantly, COVID-19 makes banks fragile and demands more capital to absorb risk. However, the effect of COVID-19 is heterogeneous when the authors consider ownership structure. Among the diverse ownership styles, Islamic and active shareholding show their controlling wheel on capital regulation and risk-taking aptitude (financial stability) during the global (COVID-19) crisis. In normal economic conditions, private banks and minority active shareholding can be a good determinant for capital regulation and risk (financial stability). On the other hand, state-owned and large banks have been found as less capitalized and highly risky.Originality/value>This study is the pioneer in exploring capital regulation and risk toward the recent global (COVID-19) crisis.
Business And Economics--Banking And Finance; COVID-19; Capital regulation; Risk-taking; Financial stability; Ownership structure; Commercial banks; Aptitudes; Economic conditions; Risk behavior; Banking industry; Risk taking; Trade; Regulation; Panel data; Ownership; Islamic financing; Banks; Capital; Islam; Crises; Economic impact; Pandemics
Full text:
Available
Collection:
Databases of international organizations
Database:
ProQuest Central
Type of study:
Prognostic study
Language:
English
Journal:
International Journal of Islamic and Middle Eastern Finance and Management
Year:
2022
Document Type:
Article
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