The effect of capital adequacy guidelines on large bank holding companies |
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| Authors: | Larry D. Wall |
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| Affiliation: | 1. School of Mechanical Engineering, Jiangsu University, Zhenjiang 212013, China;2. School of Mechatronic Engineering, Polytechnic University of Metropolitan Zone of Guadalajara, Tlajomulco de Zúñiga 45670, Mexico;3. School of Mechatronic Engineering, China University of Mining and Technology, Xuzhou 221116, China;1. International and Inter University Centre for Nanoscience and Nanotechnology, Mahatma Gandhi University, Kottayam, Kerala India;2. Department of Chemistry, Nirmala College Muvattupuzha, Ernakulam, Kerala, India;3. School of Chemical Sciences, Mahatma Gandhi University, Kottayam, Kerala India |
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| Abstract: | The United States federal bank regulators imposed numerical capital guidelines in 1981. If these guidelines are binding on bank holding companies, then theoretical evidence suggests that banking organizations may be increasing asset risk. This study tests empirically the hypothesis that the guidelines are binding. Two models of changes in bank holding company equity capital to assets ratios are developed and tested using maximum likehood estimation: a regulatory model and a market model. The results indicate that most large bank holding companies are influenced by regulatory forces. |
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