Relationship between Banks’ Capital and Credit Risk-Taking through Syndicated Loan

Lin, Shu Ling and Chen, Wei Peng and Lu, Jun (2015) Relationship between Banks’ Capital and Credit Risk-Taking through Syndicated Loan. Modern Economy, 06 (12). pp. 1297-1308. ISSN 2152-7245

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Abstract

This paper aims to investigate whether banks exploit their information advantage over bank-dependent borrowers, analyzing the impact of capital level on banking credit risk-taking under syndication loans. By using a unique data composed of 4828 syndicated loan of publicity banks facilities from the U.S. for the period 1987-2010, we propose theoretical issues of the impact and effectiveness of banks’ credit risk-taking from the perspectives of borrowers’ bank dependent. The results show that there is positive correlation between the ratios of bank’s capital over its total assets and banks’ credit risk-taking. It implies that banks with lower capital level charge higher lending spread for borrowers with fewer cash flows; hence the banks would bear a lower probability of default.

Item Type: Article
Subjects: AP Academic Press > Multidisciplinary
Depositing User: Unnamed user with email support@apacademicpress.com
Date Deposited: 07 Jun 2024 10:00
Last Modified: 07 Jun 2024 10:00
URI: http://info.openarchivespress.com/id/eprint/1781

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