Relationship between Risk-taking, Capital Regulation and Bank Performance: Empirical Evidence from Bangladesh

• Main Authors: Morshedur M. RAHMAN, Ali Arshad CHOWDHURY, Mouri DEY
• Format: Article
• Language: English
• Published: Ala-Too International University 2018-11-01
• Series: Eurasian Journal of Business and Economics
• Subjects: panel data analysis; performance; capital regulation; risk-taking; commercial banks; panel data analysis; performance
• Online Access: http://www.ejbe.org/EJBE2018Vol11No22p029RAHMAN-CHOWDHURY-DEY.pdf

This paper attempts to analyse the relationships between risk-taking, capital regulation and performance in banking sector of Bangladesh. We use Generalized Methods of Moments (GMM) in an unbalanced panel data using 38 commercial banks of Bangladesh for a period of 2007-2016. The empirical results show a significant negative relation between risk taking and capital regulation. Results also reveal that there is a significant positive relation between capital regulation and performance, and a significant negative relation between risk and performance. This study provides various suggestions about risk management and capital adequacy for the regulators, stakeholders and government.