Abstract
We try to look for an answer to the simultaneous impact of changes in capital ratio at risk taking incentive for Tunisian banks under regulation pressure. Our analysis is based on a structural model of two simultaneous equations, originally developed by Shrieves and Dahl (1992), and applied to ten Tunisian universal banks and covers the period from 1990 to 2012 by panel data. The results show firstly, that regulatory pressure led to the adoption of an adequacy required capital does not imply a decrease or an increase in the incentive in risk-taking and secondly that the institutional and legal mechanism shows a positive and significant effect on the level of capital ratio. Regulatory pressure seems to have the desired effect on the behavior of banks on the side of capital. Any change in the level of risk does not induce any effect on the level of capital ratio for all the period of our analysis. Tunisian banks have a preference for risk, but the effort of capitalization is still insufficient. This behavior confirm the existence of moral hazard in banks caused by the safety net and the assistance for the protection guaranteed by the Central Bank. Moreover, by strengthening their capital levels, these banks reduce significantly their incentive to take risks.
Highlights
The objective of our paper is to investigate the simultaneous impact of changes in capital ratio from the level of risk-taking by Tunisian banks under the influence of regulatory pressure in terms of prudential capital requirement
This can be explained by the fact that the will of the institutions to comply with regulatory capital standards depends in part on their net interest margin, which covers the cost of risk and contributes significantly to the realization of the value measured by their Net banking income
The results obtained in our estimates show that the total period (1990-2012), the change in the ratio of regulatory capital (ΔCAR) has a significant and negative impact on the risk-taking behavior (ΔRISK) and statistically significant with a t-Student in the order of (4.14) to a confidence level greater than 1%
Summary
The objective of our paper is to investigate the simultaneous impact of changes in capital ratio from the level of risk-taking by Tunisian banks under the influence of regulatory pressure in terms of prudential capital requirement. Given its range of specifications have been improved by the contribution of Arellano and Bond (1991) and Dahl and Shrieves (1992) to obtain a better estimation and understanding of the problem of endogeneity and multiple collinearity. These authors used the generalized method of moments (GMM), and the techniques of 2SLS and 3SLS. Our structural model seeks to explain the direct and simultaneous endogenous potential impact of each component (ΔCAR and ΔRISK) as exogenous variables. The position of our results compared to those found by other authors will be presented towards the end of this final section
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