Bank capital management: International evidence

The Impact of Changes in Bank Ownership Structure on the Allocation of Capital: International Evidence

A new wave of bank privatizations in the past decade has significantly changed the ownership structure of banking systems around the world. This paper explores how these changes affect the allocation of capital within countries. We show that the decline in government ownership of banks has a different impact on capital allocation efficiency, depending on whether foreigners or large domestic sha...

International Capital Mobility: Evidence from Panel Data

Krol (1996) reports estimates of the saving-investment correlation, based on panel regressions, that are much lower than commonly found in the literature. This note argues that this low estimate is not related to the panel estimation technique, as Krol claims, but largely to the inclusion of Luxembourg in the sample. Panel estimation only reduces the correlation’s estimate by about 0.12. Octobe...

Bank Capital Shocks and Portfolio Risk: Evidence from Japan

Despite the downward trend of land prices and the ex-post low return on real estate loans, Japanese banks increased their lending to the real estate sector during the 1990s. We argue that this phenomenon can be explained by the risk-shifting incentives of banks and discover that banks with low capital-to-asset ratios and low franchise value chose high-risk assets such as real estate loans. Unli...

Bank Capital and Monitoring: Evidence from Loan Quality

There are two competing theoretical perspectives on whether bank capital improves or adversely affects banks’ monitoring incentives. We show that bank capital is positively associated with loan quality, an outcome of bank’s monitoring effort, and two salary-based ex-ante measures of monitoring effort that capture quality and quantity of labor input into monitoring. The evidence is robust to a b...

Higher Bank Capital Requirements and mortgage pricing: evidence from the Countercyclical Capital Buffer (CCB)