Capital Regulation and Credit Risk Taking: Empirical Evidence from Banks in Emerging Market Economies

27 Pages Posted: 13 Sep 2004

See all articles by Christophe J. Godlewski

Christophe J. Godlewski

University of Strasbourg - Faculty of Law and Business; EM Strasbourg Business School; LaRGE Research Center

Date Written: August 2004

Abstract

The primary purpose of this article is to investigate the relationship between bank capital and credit risk taking in emerging market economies. We also investigate the influence of several regulatory, institutional and legal features on the relationship between risk and capital. We apply a simultaneous equations framework following Shrieves and Dahl (1992) and Jacques and Nigro (1997). Our results corroborate the existing findings for US and other industrial economies, putting forward the impact of capital regulation on banks' behavior. We also show empirical evidence on the role of the regulatory, institutional and legal environment in driving bank capitalization and credit risk taking behavior in emerging market economies.

Keywords: Bank capital and risk taking, bank regulation, emerging market economies, regulatory, institutional and legal environment

JEL Classification: C31, F39, G21, G28

Suggested Citation

Godlewski, Christophe J., Capital Regulation and Credit Risk Taking: Empirical Evidence from Banks in Emerging Market Economies (August 2004). Available at SSRN: https://ssrn.com/abstract=588163 or http://dx.doi.org/10.2139/ssrn.588163

Christophe J. Godlewski (Contact Author)

University of Strasbourg - Faculty of Law and Business ( email )

1 place d'Athènes
Strasbourg, 67000
France

HOME PAGE: http://droit.unistra.fr/

EM Strasbourg Business School ( email )

61 Avenue de la Forêt Noire
Strasbourg, 67000
France

HOME PAGE: http://www.em-strasbourg.eu/

LaRGE Research Center ( email )

1 place d'Athènes
Strasbourg, 67000
France

HOME PAGE: http://droit.unistra.fr/

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