Kiel Working Papers, Kiel Institute for World Economics
No 1192:
Does Capital Regulation Matter for Bank Behavior? Evidence for German savings banks
Frank Heid, Daniel Porath and Stéphanie Stolz
Abstract: The aim of this paper is to assess how German savings
banks adjust capital and risk under capital regulation. We estimate a
modified version of the model developed by Shrieves and Dahl (1992). In
comparison to former research, we impose fewer restrictions with regard to
the impact of regulation on capital and risk adjustments. Besides, we
complement our analysis with dynamic panel data techniques and a rolling
window approach.
We find evidence that the coordination of capital and
risk adjustments depends on the amount of capital the bank holds in excess
of the regulatory minimum (the so-called capital buffer). Banks with low
capital buffers try to rebuild an appropriate capital buffer by raising
capital and simultaneously lowering risk. In contrast, banks with high
capital buffers try to maintain their capital buffer by increasing risk
when capital increases.
Keywords: bank regulation, risk taking, bank capital; (follow links to similar papers)
JEL-Codes: G21,; G28; (follow links to similar papers)
36 pages, December 2003
Before downloading any of the electronic versions below
you should read our statement on
copyright.
Download GhostScript
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Downloadable files:
kap1192.pdf 
Download Statistics
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Programing by
Design Joakim Ekebom
