Risk and Capital in Indonesian Large Banks

Arisyi Fariza Raz, (2018) "Risk and capital in Indonesian large banks", Journal of Financial Economic Policy, Vol. 10 Issue: 1, pp.165-184, DOI/10.1108/JFEP-06-2017-0055

Posted: 28 Sep 2018

See all articles by Arisyi Raz

Arisyi Raz

Birmingham Business School

Date Written: June 14, 2017

Abstract

This study investigates the relationship between bank risk and capital using data on 15 Indonesian large banks between 2008 and 2015. Using z-score and Delta- CoVaR to measure both idiosyncratic and systemic risks, our empirical investigation suggests that capital has a negative and significant relationship with these risk measures. We also find that higher systemic risk encourages banks to increase their capital. However, similar evidence is not found in idiosyncratic risk models. Finally, we show that the role of capital in reducing risk is only robust during normal periods since banks may increase their assets risk during times of financial distress.

Keywords: Bank, Systemicrisk, Financial Markets and Institutions, Capital, Financial Risk and Risk Management, Insolvency

JEL Classification: C36, G21, G32

Suggested Citation

Raz, Arisyi, Risk and Capital in Indonesian Large Banks (June 14, 2017). Arisyi Fariza Raz, (2018) "Risk and capital in Indonesian large banks", Journal of Financial Economic Policy, Vol. 10 Issue: 1, pp.165-184, DOI/10.1108/JFEP-06-2017-0055. Available at SSRN: https://ssrn.com/abstract=3247152

Arisyi Raz (Contact Author)

Birmingham Business School ( email )

Edgbaston Park Road
Birmingham, B15 2TY
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
89
PlumX Metrics