Abstract
Purpose – The purpose of this paper is to investigate the relationship between capital adequacy (CA) and the performance of select public and private sector banks and thereby to attain an insight of whether the capital adequacy maintenance affects bank performance differently or not based on their nature of concern.
Design/methodology/approach – The study utilized a balanced panel data set using bank level data of 37 banks indexed at Bombay stock exchange (BSE) across public and private sector for the period of 10 years (2009-2018). The study takes 370 observation into consideration (i.e.,37 banks over time frame of 10 years). The study is based on secondary financial data obtained from the capital line database. The balanced panel regression model for capturing the performance of banks in relation to capital adequacy has been adopted for the study.
Findings – The results of the study confirm that there is a significant impact of capital adequacy on performance of the banks. In addition to it, it also confirms the differentiating performance of banks based on the nature of concern (i.e public and private) with respect to the variable discussed herewith.
Originality/value – Unlike prior studies that found a positive relationship between CAR and the performance of banks. This study provides the latest insight into differentiating approach of capital maintenance by public and private sector banks and thereby analyzes its impact on their performance. Besides, this study controls for the potential problem of heteroscedasticity
Recommended Citation
Mohammad Mir, Shakeeb and Shah, Farooq Ahmad
(2022)
"Does Capital Adequacy Affect Bank Performance? A Comparative Study of Select Public and Private Sector Banks in India,"
DLSU Business & Economics Review: Vol. 31:
No.
2, Article 4.
DOI: https://doi.org/10.59588/2243-786X.1187
Available at:
https://animorepository.dlsu.edu.ph/ber/vol31/iss2/4
Included in
Accounting Commons, Economics Commons, Finance and Financial Management Commons, Marketing Commons
