Abstract
This paper investigates the behavior of capital buffers of Australian banks to changes in the business cycle. More particularly, whether there is a behavioral difference between big and small banks, and whether the 2008-09 global financial crisis influenced bank behavior with respect to capital buffers. Applying the Generalized Method of Moments technique, we find the evidence to support pro-cyclical behavior of large banks, but counter-cyclical of small banks. Our results also show that banks with large size, large risky portfolio, and high lending growth rate tend to hold less capital than their peers. Finally, our results suggest that the latest financial crisis did induce banks to hold more capital.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
