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JOURNAL OF ACCOUNTING AND FINANCE
Is Capital Inadequacy a Factor for Bank Failure? Evidence from US Banking
Author(s): Abdus Samad
Citation: Abdus Samad, (2011) "Is Capital Inadequacy a Factor for Bank Failure? Evidence from US Banking" Vol. 11, Iss. 4, pp. 105 - 110
Article Type: Research paper
Publisher: North American Business Press
Abstract:
If capital adequacy is an important determinant for bank failure, the natural hypothesis is that there exists a significant difference in capitalization between failed banks and non-failed banks. The paper tests this hypothesis by using the ANOVA and the Kruskal-Wallis K tests t on four measures of capital adequacy: Tier 1 risk based capital to average total assets (T1RBCATA), Total risk based capital to risk weighted assets (TRBCRWA), equity capital to assets (EQCTA), and Tier 1 capital to risk weighted assets (T1RWA). The paper finds significant differences in capital adequacy between the failed and survived banks in all four measures.
