The Impact of Regulatory Capital and Bank Characteristics on the Relationship Between Bank Competition and Risk Taking in the Banking System

This paper explores the association between bank competition, regulatory capital, and bank risk in Egyptian banks and also examines the interaction between bank competition and regulatory capital and their impact on bank risk taking in developing countries like Egypt. The paper also investigates the effect of bank characteristics on the relationship between bank competition and bank risk taking through a sample of 27 Egyptian-listed banks during the period 2012-2018 using OLS regression. The results indicate that there is a negative impact of bank competition on bank risk taking and a positive effect of regulatory capital on bank risk taking in the Egyptian-listed banks. The results also show that increase in regulatory capital plays a vertical role in enhancing the association between competition and bank risk taking, and also there is a positive impact of bank characteristics like bank size and diversification on bank risk taking in Egyptian banks. The results indicate that there is no effect of bank type, leverage and profitability to support the relationship between bank competition and risk taking.