Do Basel III Higher Common Equity Capital Requirements Matter for Bank Risk-taking Behaviour? Lessons from South Africa

Kolade Sunday Adesina, John Muteba Mwamba

Research output: Contribution to journalArticlepeer-review

9 Citations (Scopus)

Abstract

This paper examines the role of common equity capital in determining the risk-taking behaviour of banks in South Africa. Using system GMM, the results show that higher common equity capital is associated with lower bank risk. Additionally, the results show that there is a negative and significant relationship between business cycles and bank risk, while the relationship between bank market power and risk is positive and significant. The findings remain robust after using alternative measures of bank risk. On the whole, this study recommends that an increase in common equity capital should be coupled with control of bank market power to achieve the goal of curtailing excessive risk appetite of banks.

Original languageEnglish
Pages (from-to)319-331
Number of pages13
JournalAfrican Development Review
Volume28
Issue number3
DOIs
Publication statusPublished - 1 Sept 2016

ASJC Scopus subject areas

  • Development

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