The Wealth Effect of the Risk-Based Capital Regulation on the Commercial Banking Industry

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The purpose of this study is to examine the wealth effect of the Risk-Based Capital (RBC) regulation on the U.S. commercial banking industry. The RBC plan was first proposed in January 1986, and its final form was announced on July 11, 1988. This plan resulted from dissatisfaction with the old capital regulation, which did not account for asset risk and off-balance sheet activities. The present study hypothesizes that the new regulation restricted bank optimal behavior and, therefore, adversely affected stock prices. The second and third hypotheses suggest that investors used company specific information, Net Tier 1 and Total risk-based capital ... continued below

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vii, 140 leaves

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Zoubi, Marwan M. Sharif (Marwan Mohd Sharif) August 1994.

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  • Zoubi, Marwan M. Sharif (Marwan Mohd Sharif)

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Description

The purpose of this study is to examine the wealth effect of the Risk-Based Capital (RBC) regulation on the U.S. commercial banking industry. The RBC plan was first proposed in January 1986, and its final form was announced on July 11, 1988. This plan resulted from dissatisfaction with the old capital regulation, which did not account for asset risk and off-balance sheet activities. The present study hypothesizes that the new regulation restricted bank optimal behavior and, therefore, adversely affected stock prices. The second and third hypotheses suggest that investors used company specific information, Net Tier 1 and Total risk-based capital ratios respectively, in valuing stocks of the affected bank holding companies. Hypotheses four and five suggest that abnormal returns are proportionally related to the levels of Net Tier 1 or Total RBC ratio. Both the traditional event study and the portfolio time-series regression, with RBC ratios (Net Tier 1 or Total) as the weight factors, are used in this study.

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vii, 140 leaves

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  • August 1994

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  • March 24, 2014, 8:07 p.m.

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  • Nov. 18, 2014, 10:36 a.m.

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Zoubi, Marwan M. Sharif (Marwan Mohd Sharif). The Wealth Effect of the Risk-Based Capital Regulation on the Commercial Banking Industry, dissertation, August 1994; Denton, Texas. (digital.library.unt.edu/ark:/67531/metadc278264/: accessed August 17, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; .