IDEAS home Printed from https://ideas.repec.org/a/wsi/ijfexx/v10y2023i03ns2424786323500196.html
   My bibliography  Save this article

Quadratic effect of bank size on capital regulation and risk-taking behavior: Evidence from the Central Europe

Author

Listed:
  • Syed Moudud-Ul-Huq

    (Department of Finance, Performance & Marketing, Teesside University International Business School (TUIBS), Teesside University, United Kingdom2Department of Accounting, Mawlana Bhashani Science and Technology University, Tangail, Bangladesh)

  • Musfikur Rahman

    (Department of Accounting, Mawlana Bhashani Science and Technology University, Tangail, Bangladesh)

Abstract

This paper primarily examines the quadratic effect of banks’ size on capital regulation and risk-taking behavior by using simultaneous equation approach. This paper primarily examines the quadratic effect of banks’ size on capital regulation and risk-taking behavior by using simultaneous equation approach. To carry out the objective, this study has been built on the two-stage least squares (2SLS) method for a dynamic unstructured panel data of 85 banks from the Central European banks for the period 2012–2017. There is a positive and significant relation between regulatory capital and risk. Also, higher risk-taking behavior causes banks to sacrifice their stability. This study also finds that there is a negative correlation between bank size and capital, indicating that larger the bank size lower tendency to keep capital more. In similar way, there is also a negative association between bank size and risk taking, indicating that lower tendency of taking risk by large banks and vice-versa. Finally, this paper can be used as a medium of information for the stakeholders of banks and others financial institutions of the country. There is a dearth of literature which was built on the quadratic effect of bank size regarding recent financial regulation and risk.

Suggested Citation

  • Syed Moudud-Ul-Huq & Musfikur Rahman, 2023. "Quadratic effect of bank size on capital regulation and risk-taking behavior: Evidence from the Central Europe," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 10(03), pages 1-22, September.
    • Handle: RePEc:wsi:ijfexx:v:10:y:2023:i:03:n:s2424786323500196
    DOI: 10.1142/S2424786323500196
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S2424786323500196
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S2424786323500196?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:ijfexx:v:10:y:2023:i:03:n:s2424786323500196. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscientific.com/worldscinet/ijfe .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.