Original Research

The role of cost of capital in regulatory capital discrepancies among developing countries

Johann Jacobs, Gary van Vuuren
South African Journal of Economic and Management Sciences | Vol 18, No 1 | a869 | DOI: https://doi.org/10.4102/sajems.v18i1.869 | © 2015 Johann Jacobs, Gary van Vuuren | This work is licensed under CC Attribution 4.0
Submitted: 22 January 2014 | Published: 04 March 2015

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Johann Jacobs, North-West University, South Africa
Gary van Vuuren, North-West University, South Africa

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Abstract

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.

 


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