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The Relationship between Bank Capital, Risk-Taking and Profitability: Fresh Evidence from Panel Quantile Approach

Year 2023, Volume: 8 Issue: 3, 378 - 403, 30.09.2023

Selim Güngör

https://doi.org/10.30784/epfad.1324401

Abstract

This study aims to reveal the relationship between bank capital (BC), risk-taking, and profitability for commercial banks in Turkey using panel quantile regression models (QRPD) with non-additive fixed effects (NAFE). Accordingly, we consider the data of 18 commercial banks for 2012-2022. Firstly, we concluded a positive relationship between banks' risk-based capital (RBC) and traditional capital ratios (CR) and return on assets (ROA); in contrast, there is a negative relationship between RBC and risk-weighted assets (RWATA). Secondly, we found a positive relationship between RBC and the loan loss provision ratio (LLPTA) in other periods except the contraction period and between CR and LLPTA in other periods except the expansion period. The findings also showed an inverted U-shaped relationship between RBC and the LLPTA and return on equity (ROE) and an N-shaped relationship between CR and ROE. Lastly, we discovered a positive relationship between RWATA and ROA and ROE, whereas a negative relationship exists between LLPTA and ROA. The findings provide valuable insights into the validity of the moral hazard, cost-skimping, regulatory assumptions, agency, portfolio and risk-bearing profit theories in the commercial banking sector and that risk, capital and profitability indicators are leading factors in banks’ stability.

Keywords

Risk-Taking Bank Capital Profitability Commercial Banks Panel Quantile

References

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  • Abbas, F. and Bashir, A. (2021). Ex ante, ex post risk and bank capital ratios: An empirical investigation. Journal of Economic and Administrative Sciences, Advance online publication. doi:10.1108/JEAS-06-2021-0108
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Banka Sermayesi, Risk Alma ve Kârlılık İlişkisi: Panel Kantil Yaklaşımından Yeni Kanıtlar

Year 2023, Volume: 8 Issue: 3, 378 - 403, 30.09.2023

Selim Güngör

https://doi.org/10.30784/epfad.1324401

Abstract

Bu çalışmanın amacı, Türkiye'deki ticari bankalar için banka sermayesi, risk alma ve kârlılık arasındaki ilişkiyi toplamsal olmayan sabit etkili panel kantil regresyon modelleriyle ortaya koymaktır. Bu doğrultuda, 18 ticari bankanın 2012-2022 dönemine ait verileri dikkate alınmıştır. İlk olarak, bankaların risk bazlı sermaye (RBC) ve geleneksel sermaye (CR) oranları ile aktif kârlılık (ROA) arasında pozitif bir ilişki varken, bankaların risk bazlı sermaye oranları ile risk ağırlıklı varlıkları (RWATA) arasında negatif bir ilişkinin olduğu sonucuna ulaşılmıştır. İkinci olarak, daralma dönemi hariç diğer dönemlerde RBC ile kredi zararları karşılığı oranı (LLPTA) arasında ve genişleme dönemi hariç diğer dönemlerde CR ile LLPTA arasında pozitif bir ilişkinin olduğu bulunmuştur. Bulgular ayrıca RBC ile LLPTA ve özkaynak kârlılığı (ROE) arasında ters U şeklinde, CR ile ROE arasında ise N şeklinde bir ilişkinin olduğunu göstermiştir. Son olarak, RWATA ile ROA ve ROE arasında pozitif ilişki varken, LLPTA ile ROA arasında negatif bir ilişkinin olduğu tespit edilmiştir. Bulgular, ahlaki tehlike, maliyet cimriliği, düzenleyici varsayımlar, vekâlet, portföy ve risk barındıran kâr teorilerinin ticari bankacılık sektöründe geçerliliğine ve risk, sermaye ve kârlılık göstergelerinin bankaların istikrarı üzerinde öncü faktörler olduğuna ilişkin değerli bilgiler sunmaktadır.

Keywords

Risk Alma Banka Sermayesi Kârlılık Ticari Bankalar Panel Kantil

References

  • Abbas, F. and Aziz, B. (2020). The interdependence between capital and profitability in banking industry of Asia: A comparative study of developed and developing economies. NUML International Journal of Business & Management, 15(2), 17-34. Retrieved from https://www.proquest.com/
  • Abbas, F. and Bashir, A. (2021). Ex ante, ex post risk and bank capital ratios: An empirical investigation. Journal of Economic and Administrative Sciences, Advance online publication. doi:10.1108/JEAS-06-2021-0108
  • Abbas, F., Ali, S., Moudud-Ul-Huq, S. and Naveed, M. (2021). Nexus between bank capital and risk-taking behaviour: Empirical evidence from US commercial banks. Cogent Business & Management, 8(1), 1947557, 1-18. https://doi.org/10.1080/23311975.2021.1947557
  • Abbas, F., Ali, S., Yousaf, I. and Wong, W-K. (2022). Economics of risk taking, risk-based capital and profitability: Empirical evidence of Islamic banks. Asian Academy of Management Journal of Accounting and Finance, 18(1), 1–31. https://doi.org/10.21315/aamjaf2022.18.1.1
  • Abbas, F., Iqbal, S. and Aziz, B. (2019). The impact of bank capital, bank liquidity and credit risk on profitability in postcrisis period:‎ A comparative study of US and Asia. Cogent Economics & Finance, 7(1), 1605683, 1-19. https://doi.org/10.1080/23322039.2019.1605683
  • Akhmedjonov, A. and Balci-Izgi, B. (2015). If bank capital matters, then how? The effect of bank capital on profitability of Turkish banks during the recent financial crisis. Macroeconomics and Finance in Emerging Market Economies, 8(1-2), 160-166. https://doi.org/10.1080/17520843.2014.940988
  • Allard, A., Takman, J., Uddin, G.S. and Ahmed, A. (2018). The N-shaped environmental Kuznets curve: An empirical evaluation using a panel quantile regression approach. Environmental Science and Pollution Research, 25, 5848-5861. https://doi.org/10.1007/s11356-017-0907-0
  • Ashraf, B.N., Arshad, S. and Hu, Y. (2016). Capital regulation and bank risk-taking behavior: Evidence from Pakistan. International Journal of Financial Studies, 4(3), 16. https://doi.org/10.3390/ijfs4030016
  • Ayaydin, H. and Karakaya, A. (2014). The effect of bank capital on profitability and risk in Turkish banking. International Journal of Business and Social Science, 5(1), 252-271. Retrieved from http://www.ijbssnet.com/
  • Aydin, Y. (2019). The relationship between bank capital and profitability: Evidence from Turkish banking sector. Journal of International Social Research, 12(62), 1174-1181. http://dx.doi.org/10.17719/jisr.2019.3128
  • BCBS. (1988). International convergence of capital measurement and capital standards. Retrieved from https://www.bis.org/publ/bcbs04a.pdf
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  • BRSA. (2010). Sorularla Basel III. Retrieved from https://www.bddk.org.tr/ContentBddk/dokuman/duyuru_basel_0001_53.pdf
  • Bitar, M., Pukthuanthong, K. and Walker, T. (2018). The effect of capital ratios on the risk, efficiency and profitability of banks: Evidence from OECD countries. Journal of International Financial Markets, Institutions and Money, 53, 227-262. https://doi.org/10.1016/j.intfin.2017.12.002
  • Boamah, N.A., Opoku, E. and Boakye-Dankwa, A. (2023). Capital regulation, liquidity risk, efficiency and banks performance in emerging economies. Journal of Financial Regulation and Compliance, 31(1), 126-145. https://doi.org/10.1108/JFRC-09-2021-0076
  • Bouheni, F.B. and Rachdi, H. (2015). Bank capital adequacy requirements and risk-taking behavior in Tunisia: A simultaneous equations framework. Journal of Applied Business Research, 31(1), 231-238. https://doi.org/10.19030/jabr.v31i1.9003
  • Bunyaminu, A., Bashiru, S., Amadu, I.M., Yakubu, I.N. and Iddrisu, A.J. (2021). Investigating the impact of capital adequacy ratio and corruption on bank risk-taking in Ghana. Academy of Accounting and Financial Studies Journal, 25(4), 1-7. doi:1528-2635-25-3-716
  • Celik, S. and Kaya, F. (2019). Micro-variables that affect bank profibility: A research on the Turkish banking sector. Bolu Abant İzzet Baysal Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, 19(3), 765-788. https://doi.org/10.11616/basbed.v19i49542.594328
  • Coccorese, P. and Girardone, C. (2021). Bank capital and profitability: Evidence from a global sample. The European Journal of Finance, 27(9), 827-856. https://doi.org/10.1080/1351847X.2020.1832902
  • Dao, B.T.T. and Nguyen, D.P. (2020). Determinants of profitability in commercial banks in Vietnam, Malaysia and Thailand. Journal of Asian Finance, Economics and Business, 7(4), 133-143. doi:10.13106/jafeb.2020.vol7.no4.133
  • Demir, Y. and Kucukkaplan, I. (2017). An overview of preventive, restrictive and supervisory regulations in Turkish banking system. Ömer Halisdemir Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 10(2), 188-202. Retrieved from https://dergipark.org.tr/tr/pub/ohuiibf
  • Demirguc-Kunt, A. and Kane, E.J. (2002). Deposit insurance around the globe: Where does it work? Journal of Economic Perspectives, 16(2), 175–195. https://doi.org/10.1257/0895330027319
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Details

Primary Language English
Subjects Banking Management, Risk management in Banking, Commercial Banking, Finance
Journal Section Makaleler
Authors

Selim Güngör 0000-0002-2997-1113

Publication Date September 30, 2023
Acceptance Date September 10, 2023
Published in Issue Year 2023 Volume: 8 Issue: 3

Cite

APA Güngör, S. (2023). The Relationship between Bank Capital, Risk-Taking and Profitability: Fresh Evidence from Panel Quantile Approach. Ekonomi Politika Ve Finans Araştırmaları Dergisi, 8(3), 378-403. https://doi.org/10.30784/epfad.1324401
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