Efficiency of Capital Adequacy Requirements in Reducing Risk-Taking Behavior of Tanzanian Commercial Banks

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dc.contributor.authorLotto, Josephat
dc.date.accessioned2020-10-22T12:35:12Z
dc.date.available2020-10-22T12:35:12Z
dc.date.issued2016
dc.description.abstractThis paper intended to examine the relationship between capital and risk of Tanzanian commercial banks during the period 2009-2014 using the Two Stage Least Square (2SLS) method of estimation. The empirical findings reveal a direct relationship between capital ratios and bank risk-taking behavior implying that as the level of banks’ risk increases bank managers tend to increase the bank capital ratios so as to prevent banks from violating the regulatory minimum capital requirements.The study also found a positive relationship between regulatory pressure and capital. This positive impact shows that Tanzanians large commercial banks approaching the minimum capital requirements are inclined to improve their capital base in order to circumvent the penalties resulted from infringing the legal requirements of keeping minimum capital ratio.The study further shows a positive and significant association between profitability and bank capital implying that that as the profitability of banks increases they retain more earnings to raise the level of their capital. Hence, it is concluded that improvement in profitability helps banks to increase their capital ratios and prevent them from penalty associated with failure to meet minimum capital requirements.en_US
dc.description.sponsorshipThe Institute of Finance Management (IFM)en_US
dc.identifier.issn2222-2847
dc.identifier.issn2222-1697
dc.identifier.urihttp://154.72.94.133:8080/xmlui/handle/123456789/117
dc.language.isoenen_US
dc.publisherResearch Journal of Finance and Accountingen_US
dc.subjectBank Capital Adequacy, Risk-taking behavior, Regulatory Pressure, minimum capital requirementsen_US
dc.titleEfficiency of Capital Adequacy Requirements in Reducing Risk-Taking Behavior of Tanzanian Commercial Banksen_US
dc.typeArticleen_US

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