The Relationship between Bank Capital, Risk-Taking and Profitability: Fresh Evidence from Panel Quantile Approach

Authors : Selim GÜNGÖR

Pages : 378-403

Doi:10.30784/epfad.1324401

View : 98 | Download : 74

Publication Date : 2023-09-30

Article Type : Research Paper

Abstract :This study aims to reveal the relationship between bank capital insert ignore into journalissuearticles values(BC);, risk-taking, and profitability for commercial banks in Turkey using panel quantile regression models insert ignore into journalissuearticles values(QRPD); with non-additive fixed effects insert ignore into journalissuearticles values(NAFE);. Accordingly, we consider the data of 18 commercial banks for 2012-2022. Firstly, we concluded a positive relationship between banks\` risk-based capital insert ignore into journalissuearticles values(RBC); and traditional capital ratios insert ignore into journalissuearticles values(CR); and return on assets insert ignore into journalissuearticles values(ROA);; in contrast, there is a negative relationship between RBC and risk-weighted assets insert ignore into journalissuearticles values(RWATA);. Secondly, we found a positive relationship between RBC and the loan loss provision ratio insert ignore into journalissuearticles values(LLPTA); in other periods except the contraction period and between CR and LLPTA in other periods except the expansion period. The findings also showed an inverted U-shaped relationship between RBC and the LLPTA and return on equity insert ignore into journalissuearticles values(ROE); and an N-shaped relationship between CR and ROE. Lastly, we discovered a positive relationship between RWATA and ROA and ROE, whereas a negative relationship exists between LLPTA and ROA. The findings provide valuable insights into the validity of the moral hazard, cost-skimping, regulatory assumptions, agency, portfolio and risk-bearing profit theories in the commercial banking sector and that risk, capital and profitability indicators are leading factors in banks’ stability.
Keywords : Risk Alma, Banka Sermayesi, Kârlılık, Ticari Bankalar, Panel Kantil