Comparative Study on the Capital Adequacy Ratio between Developed Countries and Emerging Countries Analysis based on Panel Data

Xinjie Yuan

doi:10.54691/806s3t31

Authors

Xinjie Yuan

DOI:

https://doi.org/10.54691/806s3t31

Keywords:

Capital Adequacy Ratio, Macroeconomic Factors, Panel Data, Developed Economies, Emerging Econom.

Abstract

This study investigates the influence of four macroeconomic factor -inflation, interest rate, broad money, and real growth rate -on the capital adequacy ratio (CAR) of six countries over the period 1998–2019. Using panel data regression with fixed effects selected via the Hausman test, the analysis compares developed nations (United States, United Kingdom, European Union) and emerging nations (China, Malaysia, Indonesia). The results show that for developed economies, inflation, interest rate, and broad money have significant effects on CAR, while for emerging economies, only the real growth rate is statistically significant. These findings suggest that capital regulation in developed countries is more sensitive to macroeconomic conditions, whereas emerging economies’ bank capital adequacy relies more on internal or micor-prudential factors. Policy implications are discussed.

Downloads

Download data is not yet available.

References

[1] Anshu, & Gakher, D. K. (2019). A study of macroeconomic factors influencing capital adequacy ratio of schedule commercial bank in India. International Journal of Research and Analytical Reviews, 6(2).

[2] Claessens, S., & Horen, N. V. (2015). The impact of the global financial crisis on banking globalization. IMF Economic Review, 63(4), 868–918.

[3] Hewaidy, A. M., & Alyousef, H. Y. (2018). Bank-specific and macroeconomic determinants of capital adequacy ratio: Evidence from Kuwaiti banks. European Journal of Economics, Finance and Administrative Sciences, 99, 5–20.

[4] Junos, S., Ma’in, M., & Jalil, S. A. (2021). Assessing the impact of macroeconomic variable and macroprudential policy element on the capital adequacy ratio. International Journal of Academic Research in Business and Social Sciences, 11(8), 390–411.

[5] Wallace, J. (2025, December 2). U.K. loosens bank capital demands for first time since financial crisis. https://structuredfinance.org/bank-of-england-lowers-capital-requirements-for-u-k-banks/

[6] Kalifa, W., & Bektas, E. (2018). The impact of bank-specific and macroeconomic variable on the capital adequacy ratio: evidence from Islamic banks. Applied Economics Letters, 25(7), 477–481.

[7] Loan, M. T., & Khue, T. T. (2021). Internal and macroeconomic factors affecting the capital adequacy ratio of commercial banks in Vietnam. Academy of Strategic Management Journal, 20(3).

[8] Mahmoud, B., Elgazzar, S., & Hanafy, K. (2015). Impact of macroeconomic variables on stock markets: Evidence from emerging markets. International Journal of Economics and Finance, 8(1), 195.

[9] Pradhan, P. D. R. S., & Shrestha, R. (2016, June 11). Impact of bank specific and macroeconomic variables on the performance of commercial banks of Nepal [Online]. pp. 1–17.

[10] Syed, A. A., & Aidyngul, Y. (2020). Macro economical and bank-specific vulnerabilities of nonperforming loans: A comparative analysis of developed and developing countries. Journal of Public Affairs, 22(2).

[11] Yüksel, S., & Ozsari, M. (2017). Influencing factors of capital adequacy ratio of the deposit banks: A panel regression analysis for Turkish banking sector. https://paris2017.econworld.org/papers/Yuksel_Ozsari_Influencing.pdf