The Relationship between Risk and Capital in Commercial Banks

Journal of Banking & Finance, Volume 16, Issue 2, April 1992, Pages 439–457

Posted: 27 Aug 2014 Last revised: 5 Sep 2014

See all articles by Ronald E. Shrieves

Ronald E. Shrieves

University of Tennessee, Knoxville - Department of Finance

Drew Dahl

Federal Reserve Banks - Federal Reserve Bank of St. Louis

Date Written: April 1992

Abstract

This study investigates the relationship between changes in risk and capital in a large sample of banks. A positive association between changes in risk and capital is found. The fact that this finding holds in banks with capital ratios in excess of regulatory minimum levels supports the conclusion that, for most banks, bank owners' and/or managers' private incentives work to limit total risk exposure. Results for banks which were undercapitalized by regulatory standards indicate that regulation was at least partially effective during the period covered. Overall, the findings support a conclusion that changes in bank capital over the period studied have been ‘risk-based’.

Suggested Citation

Shrieves, Ronald E. and Dahl, Drew, The Relationship between Risk and Capital in Commercial Banks (April 1992). Journal of Banking & Finance, Volume 16, Issue 2, April 1992, Pages 439–457, Available at SSRN: https://ssrn.com/abstract=2487420

Ronald E. Shrieves (Contact Author)

University of Tennessee, Knoxville - Department of Finance ( email )

Knoxville, TN 37996
United States

Drew Dahl

Federal Reserve Banks - Federal Reserve Bank of St. Louis ( email )

P.O. Box 442
St. Louis, MO 63166-0442
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
1,574
PlumX Metrics