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How a regulatory capital requirement affects banks' productivity: an application to emerging economies

Duygun, Meryem; Shaban, Mohamed; Sickles, Robin C.; Weyman-Jones, Thomas

Authors

Meryem Duygun

Mohamed Shaban

Robin C. Sickles

Thomas Weyman-Jones



Abstract

© 2015, Springer Science+Business Media New York. This paper presents a novel approach to measure efficiency and productivity decomposition in the banking systems of emerging economies with a special focus on the role of equity capital. We model the requirement to hold levels of a fixed input, i.e. equity, above the long run equilibrium level or, alternatively, to achieve a target equity-asset ratio. To capture the effect of this under-leveraging, we allow the banking system to operate in an uneconomic region of the technology. Productivity decomposition is developed to include exogenous factors such as policy constraints. We use a panel data set of banks in emerging economies during the financial upheaval period of 2005–2008 to analyse these ideas. Results indicate the importance of the capital constraint in the decomposition of productivity.

Journal Article Type Article
Publication Date 2015-12
Journal Journal of productivity analysis
Print ISSN 0895-562X
Electronic ISSN 1573-0441
Publisher Springer Verlag
Peer Reviewed Peer Reviewed
Volume 44
Issue 3
Pages 237-248
APA6 Citation Duygun, M., Shaban, M., Sickles, R. C., & Weyman-Jones, T. (2015). How a regulatory capital requirement affects banks' productivity: an application to emerging economies. Journal of productivity analysis, 44(3), 237-248. https://doi.org/10.1007/s11123-015-0451-1
DOI https://doi.org/10.1007/s11123-015-0451-1
Keywords Economics and Econometrics; Social Sciences (miscellaneous); Business and International Management
Publisher URL http://link.springer.com/article/10.1007%2Fs11123-015-0451-1
Copyright Statement ©2016 University of Hull
Additional Information Authors' accepted manuscript of article published in: Journal of productivity analysis, 2015, v.44, issue 3. The final publication is available at Springer via http://dx.doi.org/10.1007/s11123-015-0451-1

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