The impact of prompt corrective action on the default risk of the U.S. commercial banking sector

The impact of prompt corrective action on the default risk of the U.S. commercial banking sector As the Basel III reforms, which come into effect from 2012, place emphasis on default risk, assessing the impact of Prompt Corrective Action (PCA) on default risk is of practical relevance. We provide strong evidence that both the dynamic and the contemporaneous impact of the PCA-defined tier 1 risk-based capital ratio and the tier 1 leverage ratio on default risk is reduced following PCA’s introduction. We interpret this as evidence that PCA is effective in managing the default risk of the U.S. commercial banking sector. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

The impact of prompt corrective action on the default risk of the U.S. commercial banking sector

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Publisher
Springer US
Copyright
Copyright © 2013 by Springer Science+Business Media New York
Subject
Economics / Management Science; Finance/Investment/Banking; Accounting/Auditing; Econometrics; Operations Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1007/s11156-013-0378-4
Publisher site
See Article on Publisher Site

Abstract

As the Basel III reforms, which come into effect from 2012, place emphasis on default risk, assessing the impact of Prompt Corrective Action (PCA) on default risk is of practical relevance. We provide strong evidence that both the dynamic and the contemporaneous impact of the PCA-defined tier 1 risk-based capital ratio and the tier 1 leverage ratio on default risk is reduced following PCA’s introduction. We interpret this as evidence that PCA is effective in managing the default risk of the U.S. commercial banking sector.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Aug 11, 2013

References

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