Capital buffer for stronger bank stability: Empirical evidence from Indonesia’s commercial banks

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Abstract

This study investigates the relationships between capital buffer and bank stability among commercial banks in Indonesia during the period 2001 to 2015. The scope of this study is before and after the 2007-2008 financial crisis and the implementation of Basel II and Basel III in Indonesia’s banking sector. By using dynamic panel regression, the estimation indicates that improvement of the capital buffer will enhance bank stability. Furthermore, bank market power, revenue diversification, and size have a positive impact on boosting bank stability. Hence, this study offers insights into the role of capital buffer in supporting bank stability.

Original languageEnglish
Pages (from-to)55-67
Number of pages13
JournalPertanika Journal of Social Sciences and Humanities
Volume26
Issue numberAugust
Publication statusPublished - 1 Aug 2018

Keywords

  • Bank capital
  • Bank capital buffer
  • Bank stability

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