South African Journal of Economic and Management Sciences
On-line version ISSN 1015-8812
JACOBS, Johann and VAN VUUREN, Gary. The role of cost of capital in regulatory capital discrepancies among developing countries. S. Afr. j. econ. manag. sci. [online]. 2015, vol.18, n.1, pp. 84-104. ISSN 1015-8812. http://dx.doi.org/10.17159/2222-3436/2015/v18n1a7.
Capital as a regulatory instrument has been shown to contribute to competitiveness distortions between developed and developing countries. There is a dearth of literature that analyses the possibility of further competitiveness discrepancies to which capital requirements may contribute among developing countries. This article explores whether regulatory capital requirements lead to unequal competitive conditions between developing countries based on their costs of capital. It also attempts to identify drivers of such discrepancies. Data of 52 financial institutions from 20 countries spread across 4 geographical regions are used for the analysis.
Keywords : capital requirements; cost of capital; developing economies; banks; Basel; Solvency II.