PurposeThe purpose of this paper is to examine the behavior of banking risk in the emerging economies, particularly Indonesia and contribute to the discussion on the existing policy debate regarding the impact of capital on bank risk.Design/methodology/approachThis study investigates the relationship between bank risk and capital using data on 15 Indonesian large banks between 2008 and 2015, using z-score and Delta-CoVaR to measure both idiosyncratic and systemic risks.FindingsThe empirical investigation suggests that capital has a negative and significant relationship with these risk measures. The authors also find that higher systemic risk encourages banks to increase their capital. However, similar evidence is not found in the idiosyncratic risk models. Finally, the role of capital in reducing risk is considered robust only during the normal periods, as banks may increase their assets risk during times of financial distress.Originality/valueSystemic risk (CoVaR) is used to represent bank risk. This study focuses on the Indonesian banking sector (capture institutional arrangements and regulatory environment). It covers the period of 2008 GFC and post-crisis period.
Journal of Financial Economic Policy – Emerald Publishing
Published: Apr 3, 2018
It’s your single place to instantly
discover and read the research
that matters to you.
Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.
All for just $49/month
Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly
Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.
Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.
Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.
All the latest content is available, no embargo periods.
“Hi guys, I cannot tell you how much I love this resource. Incredible. I really believe you've hit the nail on the head with this site in regards to solving the research-purchase issue.”Daniel C.
“Whoa! It’s like Spotify but for academic articles.”@Phil_Robichaud
“I must say, @deepdyve is a fabulous solution to the independent researcher's problem of #access to #information.”@deepthiw
“My last article couldn't be possible without the platform @deepdyve that makes journal papers cheaper.”@JoseServera