Does capital adequacy ratio influence risk-taking behaviour of conventional and Islamic banks differently? Empirical evidence from dual banking system of Malaysia

What is it about?

The study investigates the influence of capital adequacy ratio stipulated in Basel III on the risk-taking behaviour of Islamic and conventional commercial banks in Malaysia. Capital adequacy ratio discourages risk-taking behaviour of all banks, particularly conventional banks. Evidence is established regarding the similarity of risk-taking behaviour between the managers of the two types of banks. Banks in the mixed banking system of Malaysia, regardless of their type, enjoy considerable capital buffers. It is crucial to strategise for efficient use of capital buffers.

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