Author(s)

Shu Ling Lin, Wei Peng Chen, Jun Lu

Department of Information and Finance Management, College of Management, National Taipei University of Technology, New Taipei City.

This paper aims to investigate whether banks exploit their information advantage over bank-dependent borrowers, analyzing the impact of capital level on banking credit risk-taking under syndication loans. By using a unique data composed of 4828 syndicated loan of publicity banks facilities from the U.S. for the period 1987-2010, we propose theoretical issues of the impact and effectiveness of banks’ credit risk-taking from the perspectives of borrowers’ bank dependent. The results show that there is positive correlation between the ratios of bank’s capital over its total assets and banks’ credit risk-taking. It implies that banks with lower capital level charge higher lending spread for borrowers with fewer cash flows; hence the banks would bear a lower probability of default.

Capital Regulation, Syndication Loans, Credit Risk-Taking, Nonperforming Loan (NPL), Probability of Default

Lin, S. , Chen, W. and Lu, J. (2015) Relationship between Banks’ Capital and Credit Risk-Taking through Syndicated Loan. Modern Economy, 6, 1297-1308. doi: 10.4236/me.2015.612123.