"http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd"> Systemic risk, bank’s capital buffer, and leverage | Wibowo | Economic Journal of Emerging Markets

Systemic risk, bank’s capital buffer, and leverage

Buddi Wibowo

Abstract


This paper measures individual bank’s impact on banking systemic risk and examines the effect of individual bank’s capital buffer and leverage to bank’s systemic risk impact in Indonesia during 2010-2014. Using Merton’s distance-to-default to measure systemic risk, the study shows a significant negative relationship between bank’s capital buffer and systemic risk. High capital buffer tends to lowering bank’s impact on systemic risk. Bank’s leverage level also influences its contribution to systemic risk, even though the impact is much lower compared to that of capital buffer impact.


Keywords


Systemic risk, bank competition, distance-to-default, capital buff-er, leverage

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References


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DOI: http://dx.doi.org/10.20885/ejem.vol9.iss2.art4

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Economic Journal of Emerging Markets (EJEM)
ISSN 2086-3128 (print), ISSN 2502-180X (online)
Published by:
Center for Economic Studies, Department of Economics,
Universitas Islam Indonesia, Indonesia.

Creative Commons License
EJEM by http://journal.uii.ac.id/index.php/JEP/ is licensed under a Creative Commons Attribution 4.0 International License.