The Effects of Capital Regulation on Banks : An Analytical Approach

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概要

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• The effects of capital regulation on a bank are examined in this study. Violating the legal requirements is costly for both the bank manager and the shareholder. Through a stock-based compensation plan, stock prices can be used to evaluate the manager. But stock prices are not always the most accurate measure. The purpose of this compensation plan is to provide incentive to the bank manager. Introducing capital regulation can provide for a more accurate measure. However, this may not work because a moral hazard exists to the extent that the shareholder cannot observe the manager's effort. I develop a basic agency model and show that when accounting is very flexible, imposing capital regulation is meaningless. I also show that introducing capital regulation is generally good for the shareholder because it reduces monetary compensation to the manager. However, the effectiveness of the capital ratio regulation depends on the relative level of the ratio and accounting flexibility.

• 関西学院大学の論文

著者

• KOJIMA Koji

  Department of Accounting, School of Business University of Washington

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• The Effects of Capital Regulation on Banks : An Analytical Approach

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