摘要：This study aims to examine the interplay between adjustments in risk and adjustments in capital of the Indonesian commercial banks using a simultaneous approach. In addition, the study analyzes bank specific factors determining the adjustments of risk and adjustments in capital as well as the role of capital buffer and the business cycle in moderating that adjustments. The study uses Two-Stage Least Square (2-SLS) model of panel data techniques to analyze the data of 68 commercial banks from 2005 to 2018. The results show that adjustments in risk and adjustments in capital influence each other simultaneously in a positive direction. Capital buffer levels weaken the influence of capital adjustments on risk adjustments and the effect of risk adjustments on capital adjustments. Last, the business cycle weakens the effect of risk adjustments to capital adjustments but does not weaken the effect of capital adjustments to risk adjustments. The results may suggest that the Indonesia Financial Services Authority must tighten bank supervision despite good economic conditions and ensure that an increase in bank risk must be accompanied by an increase in capital. It must pay more attention to banks with low capital buffer because these banks may speculate more by increasing their risk without raising capital adequately.
关键词：Capital adjustment; Risk adjustment; Simultaneous model; Indonesian bank
