The association between bank capital and risk taking decision in a tough competitive environment

What is it about?

This paper investigates the association between capital regulation and risk taking behaviour of Indian banks after incorporating the influence of competition. Further, the study intends to enrich the existing literature by providing empirical evidence on the role of human resources in managing risk along with the influence of other bank specific and macroeconomic variables.

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Why is it important?

The study is very important for policy decision as there is a regulatory pressure for banks all over the world to maintain a minimum level of capital based on risk weighted assets. Further, the degree of competition in the market may influence the bank stability positively or negatively as envisaged in the empirical literature. The present paper tries to examine empirically how the Indian banks simultaneously take decision on the level of capital and risk in the event of tough market competition.