Abstract
This paper considers the factors that determine Indonesian bank risk both before and after the Asian Financial Crisis (AFC). In the pre-AFC period, bank capital holdings are positively associated with bank revenue risk, which is attributed to a combination of regulatory laxity as well as laxity of enforcement. In the post-AFC period, capital is found to reduce bank risk in a non-linear manner. Franchise value is associated with lower bank risk, but in a non-linear manner; low levels of franchise value are associated with increased bank risk, while higher levels of franchise value result in lower bank risk. It is also concluded the low-to-medium levels of bank loan growth are associated with lower bank risk; however, high levels of loan growth are risk increasing. These results point to the importance of enforcement of regulatory oversight in reducing bank risk.
Original language | English |
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Pages (from-to) | 333 - 358 |
Number of pages | 26 |
Journal | Journal of the Asia Pacific Economy |
Volume | 18 |
Issue number | 2 |
DOIs | |
Publication status | Published - 2013 |
Externally published | Yes |