Empirical analysis of Brazilian banks' capital buffers during the period 2001-2011

Abstract

International literature indicates that the capital buffers held by banks result notably from the trade-off that exists between the cost of holding capital, adjustment costs, and bankruptcy costs, which all have a direct impact on banks' capital structures. The aim of this paper is to study the degree of sensitivity of Brazilian banks' capital buffers to the determining factors established in the literature, by using a sample of 121 banks, covering the period from 2001 to 2011. The empirical analysis that was carried out found that there was a significant cost of adjusting capital buffers for the Brazilian banks. At the same time, bankruptcy cost indicated a positive relationship between risk profile and capital buffers, while the cost of holding capital did not exhibit statistical significance in the analysis.

Keywords

• instituições bancárias
• risco bancário
• buffers de capital regulatório
• painel dinâmico de dados