The Risk-Relevant Information Content and Policy Effect of Capital Adequacy Regulations for Banks in Taiwan
| Autor: | Der-Fen Huang, 黃德芬 |
|---|---|
| Rok vydání: | 2001 |
| Druh dokumentu: | 學位論文 ; thesis |
| Popis: | 89 This paper examines the information content of capital adequacy ratio and its components for risk of banks in Taiwan. Also, it investigates whether the new 1998 capital requirement mechanism provides incremental information to assess bank risk compared with the old 1992 mechanism, and evaluates which mechanism is more closely associated with bank risk. Final, it investigates whether the risk-based capital adequacy ratio has incremental and relative information about bank risk compared with the non-risk-based capital ratio (ordinary or traditional capital ratio). This paper employs an option pricing methodology to calculate implied asset risk as a proxy for total risk of banks. This methodology incorporates the non-linearity of equity, deposit insurance, and regulatory rules. Currently, almost numbers of capital adequacy ratio components used in this study are not required annual reporting disclosures. The major findings are: (1) The capital adequacy ratio and its components convey information regarding bank risk. (2) The components of the new capital ratio have incremental explanatory power over the old rules and over the non-risk-based capital ratio. In addition, the new mechanism has greater information content than the old one regarding implied asset risk, and each risk-based mechanism has greater information content than non-risk-based one. (3) Two risk dimensions categorized by regulators, credit risk and market risk, have different explanatory power. There is a positive impact of credit risk exposures on bank risk, but market risk exposures do not. (4) The rationality of risk forecast based on risk-based capital ratio is supported empirically, but it is not hold on disaggregated data (components). Based on the empirical results in this paper, we suggest that regulators and accounting standard setters should require banks to publicly disclose this regulatory information for enhancing transparency of banking. |
| Databáze: | Networked Digital Library of Theses & Dissertations |
| Externí odkaz: |
|