Why Capital’s Effect Differs in Bank Size?
International Journal of Management and Humanities (IJMH), 2019
4 Pages Posted: 4 Nov 2019
Date Written: October 16, 2019
Banks are trusted institutions. Therefore, bank management must use all of its operational tools to maintain the trust of the community. A strategic tool in sustaining that trust is adequate capital. Until now, banking activities remain the same, but with a different system. Novelty this research is a different effect of bank capital on lending behavior in each bank size category. This study used the fixed effect model in the 2004-2018 period. This study proved that smaller bank tends to implement aggressive strategies with lower capital and higher loan proportion, while larger bank manages to implement a defensive strategy with high capital and higher loan proportion.
Keywords: Bank capital, Loan growth, Bank size
JEL Classification: G20, G21, G40
Suggested Citation: Suggested Citation