Impact of Liquidity and Risk on Bank Capital: Empirical Analysis of Commercial Banks

The purpose of this study is to explore the influence of bank liquidity and bank risk on bank capital among emerging economies of Asia in post crisis conditions. The data is collected for 379 banks from Bank scope database. The data for this paper includes post crisis period ranging from 2011 to 2016. Linear regression panel-corrected standard errors approach is used to find consistent estimators. The results confirm that liquidity is negatively influencing bank capital in medium size banks while small banks are positively impacted by liquidity. The overall risk has positive effect on bank capital in all banks which is consistent with regulatory hypothesis. The findings also prove that market funding, banks size and real gross domestic product have negative effect on bank capital.