TY - JOUR
T1 - Bank regulations, bank competition and bank risk-taking
T2 - evidence from Japan
AU - Tongurai, Jittima
AU - Vithessonthi, Chaiporn
N1 - Funding Information:
The authors acknowledge financial support from the Japan Society for the Promotion of Science (JSPS KAKENHI Grant Number 18K06185 ) and the Graduate School of Business Administration, Kobe University .
Publisher Copyright:
© 2020 Elsevier B.V.
PY - 2020/9
Y1 - 2020/9
N2 - We study the relaxation of the capital requirements regulation in Japan around the global financial crisis of 2007–08, which represents a change in bank regulation, to test whether an effect of bank competition on risk-taking is moderated by a change in bank regulation. Although this particular change in bank regulation in Japan was primarily meant to help stabilize the banking system, we show that there is evidence for some spillover effects on bank risk-taking. We find that bank competition is positively associated with ex ante bank risk-taking, roughly measured as loan growth and the interest rate margin. We show that the relaxation of the capital adequacy requirement affects the influence of bank competition on bank risk-taking. With domestically active banks getting more preferential treatments from the regulatory change, the relaxation of the regulation appears to have the differential effects on bank risk-taking across the domestically active banks and the internationally active banks in Japan.
AB - We study the relaxation of the capital requirements regulation in Japan around the global financial crisis of 2007–08, which represents a change in bank regulation, to test whether an effect of bank competition on risk-taking is moderated by a change in bank regulation. Although this particular change in bank regulation in Japan was primarily meant to help stabilize the banking system, we show that there is evidence for some spillover effects on bank risk-taking. We find that bank competition is positively associated with ex ante bank risk-taking, roughly measured as loan growth and the interest rate margin. We show that the relaxation of the capital adequacy requirement affects the influence of bank competition on bank risk-taking. With domestically active banks getting more preferential treatments from the regulatory change, the relaxation of the regulation appears to have the differential effects on bank risk-taking across the domestically active banks and the internationally active banks in Japan.
KW - Bank competition
KW - Bank risk-taking
KW - Capital requirements
KW - Japan
KW - Regulation
UR - http://www.scopus.com/inward/record.url?scp=85086714122&partnerID=8YFLogxK
U2 - 10.1016/j.mulfin.2020.100638
DO - 10.1016/j.mulfin.2020.100638
M3 - Article
AN - SCOPUS:85086714122
SN - 1042-444X
VL - 56
JO - Journal of Multinational Financial Management
JF - Journal of Multinational Financial Management
M1 - 100638
ER -