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Capital Regulation and Risk-taking Behavior: Empirical Evidence for Islamic Banks

Author

Listed:
  • Yomna Daoud

    (Research Laboratory in Economics and Management, University of Sfax, Tunisia,)

  • Aida Kammoun

    (Department of Management, Higher Institute of Business Administration, Sfax, Tunisia.)

Abstract

This paper investigates whether regulatory pressures have an impact on the relationship between change in capital and bank risk-taking. On the basis of a well-developed theoretical background, capital regulation constitutes the core of prudential regulation within the banking sector. Several researches have investigated this relationship between capital and risk in conventional banks, and this subject has gained in interest since the last financial crisis. This study is one of the few studies that have attempted to provide empirical evidence on this issue for Islamic banks. We use data of Islamic banking sectors over the period 2010–2014. The results reveal that Islamic banks tend to behave differently at each level of capital adequacy. In addition, we provide some evidence that change in capital is positively related to the change in risk for highly capitalized Islamic banks.

Suggested Citation

  • Yomna Daoud & Aida Kammoun, 2022. "Capital Regulation and Risk-taking Behavior: Empirical Evidence for Islamic Banks," International Review of Management and Marketing, Econjournals, vol. 12(1), pages 43-50.
    • Handle: RePEc:eco:journ3:2022-01-5
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    Cited by:

    1. Yomna Daoud & Aida Kammoun, 2024. "Banking Regulation and Financial Soundness Nexus in View of the Crisis: An Islamic Banking Perspective," International Journal of Economics and Financial Issues, Econjournals, vol. 14(2), pages 168-177, March.

    More about this item

    Keywords

    Islamic Banking Sector; Regulatory Pressure; Total Capital; Risk-Taking;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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