Un/desired impact of capital buffers: Evidence from Indonesian bank profitability and risk-taking

The study employs a two-step system GMM technique within panel data framework to investigate the effects of capital buffers on profitability and risk behavior Indonesian commercial banks from 2010 2020. findings reveal that serve dual role, acting as safety net against potential losses while also promoting increased financial stability stronger shareholder engagement. This ultimately benefits bank its stakeholders in long run. However, positive come at cost, they are associated with reduced returns assets return equity. emphasizes importance managing effectively, striking delicate balance between risk-taking prudent management achieve optimal profitability. It underscores need for prioritize robust practices proper capitalization avoid pursuing expense these critical factors. further highlights significance policymakers finding right equilibrium through requirements fostering competitive banking industry can generate profits support economic growth.