The impact of capital requirement and ownership structure on risk-taking by banks in Pakistan: Mediating role of profitability
This study examined the impact of capital regulation and ownership structure on risktaking by commercial banks in Pakistan while concentrating on the mediating role of profitability. Bank risk-taking was measured by the standard deviations of return on assets, return on equity and Z-SCORE. Capital...
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2020
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my-uum-etd.103052023-02-09T02:10:31Z The impact of capital requirement and ownership structure on risk-taking by banks in Pakistan: Mediating role of profitability 2020 Hussain, Muhammad Sajjad Musa, Muhammad Muhaizam Ali, Abdelnaser Omran School of Economics, Finance & Banking School of Economics, Finance and Banking HG Finance This study examined the impact of capital regulation and ownership structure on risktaking by commercial banks in Pakistan while concentrating on the mediating role of profitability. Bank risk-taking was measured by the standard deviations of return on assets, return on equity and Z-SCORE. Capital regulation was measured by capital adequacy requirement, while ownership structure included private ownership, government ownership, and foreign ownership. Profitability was measured by return on assets (ROA). Data were collected from 21 commercial banks operating in Pakistan, comprising of nineteen domestic and two foreign banks over the period of 2005-2016. Thus, the sample size of the study was 252 observations (21 banks x 12 years). Two regression tests were used to examine the relationships between the variables that were under investigation. Multiple regression test with Driscoll-Kraay standard error method was used to examine the relationships of capital regulation and ownership structure with bank risk-taking, while the multiple regression model with bootstrapping procedure was used to test the mediating effect of profitability. The results revealed that capital regulation had a significant negative impact on variations in bank returns (standard deviations of return on equity and assets) but had a significant positive impact on insolvency risk (Z-SCORE). Furthermore, all ownership structures had a significant negative impact on Z-SCORE, but had a significant positive impact on the standard deviation of return on assets and standard deviation on return on equity except for foreign ownership structure. In addition, the results of the bootstrapping procedure revealed that profitability significantly mediated the relationship of ownership structure (private and foreign) and bank risk-taking. In contrast, no mediation of profitability was found between government ownership structure and capital regulation with bank risk-taking. This study facilitates regulators in the implementation of capital regulations with respect to owners’ behaviors regarding risk-taking and profitability. 2020 Thesis https://etd.uum.edu.my/10305/ https://etd.uum.edu.my/10305/1/permission%20to%20use-ALLOWED.pdf text eng staffonly https://etd.uum.edu.my/10305/2/s901688_01.pdf text eng public phd doctoral Universiti Utara Malaysia |
| institution |
Universiti Utara Malaysia |
| collection |
UUM ETD |
| language |
eng eng |
| advisor |
Musa, Muhammad Muhaizam Ali, Abdelnaser Omran |
| topic |
HG Finance |
| spellingShingle |
HG Finance Hussain, Muhammad Sajjad The impact of capital requirement and ownership structure on risk-taking by banks in Pakistan: Mediating role of profitability |
| description |
This study examined the impact of capital regulation and ownership structure on risktaking by commercial banks in Pakistan while concentrating on the mediating role of profitability. Bank risk-taking was measured by the standard deviations of return on assets,
return on equity and Z-SCORE. Capital regulation was measured by capital adequacy requirement, while ownership structure included private ownership, government ownership, and foreign ownership. Profitability was measured by return on assets (ROA). Data were collected from 21 commercial banks operating in Pakistan, comprising of nineteen domestic and two foreign banks over the period of 2005-2016. Thus, the sample size of the study was 252 observations (21 banks x 12 years). Two regression tests were used to examine the relationships between the variables that were under investigation.
Multiple regression test with Driscoll-Kraay standard error method was used to examine the relationships of capital regulation and ownership structure with bank risk-taking, while the multiple regression model with bootstrapping procedure was used to test the mediating effect of profitability. The results revealed that capital regulation had a significant negative impact on variations in bank returns (standard deviations of return on equity and assets) but had a significant positive impact on insolvency risk (Z-SCORE). Furthermore, all ownership structures had a significant negative impact on Z-SCORE, but had a significant positive impact on the standard deviation of return on assets and standard deviation on return on equity except for foreign ownership structure. In addition, the results of the bootstrapping procedure revealed that profitability significantly mediated the relationship of ownership structure (private and foreign) and bank risk-taking. In contrast, no mediation of profitability was found between government ownership structure and capital regulation with bank risk-taking. This study facilitates regulators in the implementation of capital
regulations with respect to owners’ behaviors regarding risk-taking and profitability. |
| format |
Thesis |
| qualification_name |
Doctor of Philosophy (PhD.) |
| qualification_level |
Doctorate |
| author |
Hussain, Muhammad Sajjad |
| author_facet |
Hussain, Muhammad Sajjad |
| author_sort |
Hussain, Muhammad Sajjad |
| title |
The impact of capital requirement and ownership structure on risk-taking by banks in Pakistan: Mediating role of profitability |
| title_short |
The impact of capital requirement and ownership structure on risk-taking by banks in Pakistan: Mediating role of profitability |
| title_full |
The impact of capital requirement and ownership structure on risk-taking by banks in Pakistan: Mediating role of profitability |
| title_fullStr |
The impact of capital requirement and ownership structure on risk-taking by banks in Pakistan: Mediating role of profitability |
| title_full_unstemmed |
The impact of capital requirement and ownership structure on risk-taking by banks in Pakistan: Mediating role of profitability |
| title_sort |
impact of capital requirement and ownership structure on risk-taking by banks in pakistan: mediating role of profitability |
| granting_institution |
Universiti Utara Malaysia |
| granting_department |
School of Economics, Finance & Banking |
| publishDate |
2020 |
| url |
https://etd.uum.edu.my/10305/1/permission%20to%20use-ALLOWED.pdf https://etd.uum.edu.my/10305/2/s901688_01.pdf |
| _version_ |
1776103786666786816 |