摘要：In this paper, we attempt to answer the question of whether or not bank capital affects profitability and risk. The paper forms an unbalanced panel with 354 observations using both data of 35 banks over the period 2007-2018. Two-step GMM is used to estimate the impacts of bank capital on profitability and risk in order to eliminate endogeneity and serial correlation issues. As a proxy of bank capital, the bank equity ratio, and equity level are used. Return on assets (ROA), return on equities (ROE), and net interest margin (NIM) are used to measure bank profitability, whereas nonperforming loan ratio and loan loss reserve ratio are used to measure bank risk. Bank capital displays significant impacts on profitability, which is measured by ROA and ROE, whereas capital shows no impact on bank NIM. When the loan loss reserve ratio is considered as proxy of bank risk, bank capital does not affect bank risk. The equity ratio, the proxy of bank capital, displays significant negative impacts on risk, whereas the equity level, the other proxy of bank capital, shows positive impacts on bank risk.
