On Regulation, Supervision, (De)Leveraging and Banking Competition: Harder, Better, Faster, Stronger?

39 Pages Posted: 5 Apr 2011

See all articles by Olivier De Jonghe

Olivier De Jonghe

Tilburg University - Department of Finance; National Bank of Belgium - Research Department; Tilburg University - European Banking Center

Özde Öztekin

Florida International University (FIU)

Date Written: June 1, 2010

Abstract

This paper examines international differences in banks’ capital structure adjustments across a large panel of 94 countries over the period 1993 to 2007. A bank's ability to adjust its capital ratio is influenced by corporate governance, public policy, market structure, and bank regulatory characteristics of the countries. In institutional environments with higher adjustment costs, due to the weaker governance and stricter regulation, the adjustment is significantly slower. Banks are able to make faster capital structure adjustments in countries that practice stronger private and supervisory monitoring and have more competitive banking systems. Identifying the drivers of banks’ adjustment speed towards target capital ratios contributes to our understanding of which settings influence (i) the pro-cyclicality of capital regulation and (ii) the strength of macro-financial feedback loops.

Keywords: Banks, Capital Management, Capital Regulation, International, Partial Adjustment, Institutions

JEL Classification: G20, G21, G28, G32

Suggested Citation

De Jonghe, Olivier and De Jonghe, Olivier and Öztekin, Özde, On Regulation, Supervision, (De)Leveraging and Banking Competition: Harder, Better, Faster, Stronger? (June 1, 2010). CAREFIN Research Paper No. 13/2010, Available at SSRN: https://ssrn.com/abstract=1799265

Olivier De Jonghe (Contact Author)

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
0031-13-466.2650 (Phone)

National Bank of Belgium - Research Department ( email )

Research Department
Boulevard de Berlaimont 14
B-1000 Brussels, 1000
Belgium

Tilburg University - European Banking Center ( email )

PO Box 90153
Tilburg, 5000 LE
Netherlands

Özde Öztekin

Florida International University (FIU) ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

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