ABSTRACT
The purpose of this study was to find out the interaction among liquidity creation, regulatory capital, and risk taking in the banking industry in ASEAN countries. A panel vector auto regression model was used in this study to see the interaction among those three variables. The research data used was quarterly data from banks listed on the stock exchange in the period 2009–2017. The results of the study indicated that there was a positive reciprocal relationship between regulatory capital and risk taking. Also, the regulatory capital regulations of the previous four quarters reduced liquidity creation. The results also showed that there was no interaction between liquidity creation and risk taking.
