An international examination of the economic effectiveness of banking recapitalization. Issue 3 (June 2017)

• Record Type: Journal Article
• Authors: Tahir, Suleiman; Adegbite, Emmanuel; Guney, Yilmaz
• Is Part Of: International business review. Volume 26:Issue 3(2017:Jun.)
• Page Start: 417
• Page End: 434
• Publication Date: 2017-06
• Subjects: G21 -- G28 -- E44; Banking crisis -- Financial risk -- Bank regulation -- Banking recapitalization -- International business; International business enterprises -- Periodicals; 338.8805
• DOI: 10.1016/j.ibusrev.2016.10.002
• Languages: English
• ISSNs: 0969-5931

Abstract

Highlights: We question how effective the capital adequacy ratio is in ensuring banking stability? We examined the banking recapitalization cases of Malaysia, Mexico, Nigeria, Spain and USA. We shed more light on the dynamics of banking recapitalization in varieties of capitalism. We highlight the need for countries to reflect where their economies lie and pay attention to their comparative spare capacity. We test the influence of banking recapitalization on broad economic indicators unlike immediate banking sector variables in prior research. Abstract: While the literature on capital adequacy and bank recapitalization agrees on the importance of a minimum capital requirement, recurring financial crises across the world do little to suggest that capital adequacy is enough protection for banks, even when they fully comply. By examining the case of regulation compelled banking recapitalizations in a cross-country context (during the period 1990Q1–2016Q2), we scrutinize the effectiveness of banking recapitalization on the economies of recently recapitalized countries. We provide implications for international business research, practice and policy by highlighting the need for countries adopting the Basel capital adequacy framework to pay attention to the peculiarities of their economies, the supporting regulatory mechanisms and their comparative spare capacities.