Proceedings of the 12th International Conference on Business and Management Research (ICBMR 2018)

Capital Adequacy Requirement, The Cost of Financial Intermediation and Risk Taking Behavior of The Indonesia Banking Sector

Authors
Rika Angelia Sirait, Rofikoh Rokhim
Corresponding Author
Rika Angelia Sirait
Available Online March 2019.
DOI
10.2991/icbmr-18.2019.17How to use a DOI?
Keywords
capital requirement, the cost of financial intermediation, risk-taking
Abstract

Basel I, II and III are strictly applied after the financial crisis in 1997 / 1998 and 2008 to ensure financial stability, among others by applying the minimum capital adequacy requirements that must be met by the bank in accordance with the risk profile. However, whether the impact of these requirements contributes positively to the Indonesian banking sector is still questionable, because some previous empirical studies have shown that strict capital requirements can force banks to increase their financial intermediation costs due to the rising capital cost. This study examines the relationship between minimum capital adequacy, the cost of financial intermediation and the risk-taking behavior of the Indonesia banking sector by using panel data from 45 commercial banks from 2012 to 2017. Using the Generalized Least Square (GLS) panel data regression, we find that the bank's capital ratio has a negative and significant relationship to the financial intermediation costs and risk-taking behavior of the Indonesia banking sector. We also find that the average return on equity of the Indonesia banking sector decreased during the observation period which shows that an increase in capital regulation position did not increase the cost of the banks’ equity capital.

Copyright
© 2019, the Authors. Published by Atlantis Press.
Open Access
This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

Download article (PDF)

Volume Title
Proceedings of the 12th International Conference on Business and Management Research (ICBMR 2018)
Series
Advances in Economics, Business and Management Research
Publication Date
March 2019
ISBN
10.2991/icbmr-18.2019.17
ISSN
2352-5428
DOI
10.2991/icbmr-18.2019.17How to use a DOI?
Copyright
© 2019, the Authors. Published by Atlantis Press.
Open Access
This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

Cite this article

TY  - CONF
AU  - Rika Angelia Sirait
AU  - Rofikoh Rokhim
PY  - 2019/03
DA  - 2019/03
TI  - Capital Adequacy Requirement, The Cost of Financial Intermediation and Risk Taking Behavior of The Indonesia Banking Sector
BT  - Proceedings of the 12th International Conference on Business and Management Research (ICBMR 2018)
PB  - Atlantis Press
SP  - 99
EP  - 104
SN  - 2352-5428
UR  - https://doi.org/10.2991/icbmr-18.2019.17
DO  - 10.2991/icbmr-18.2019.17
ID  - Sirait2019/03
ER  -