Spotlight On: Hyeoncheol (Charlie) Baik

Hyeoncheol (Charlie) BaikGalloway, N.J. – Shortly after completing his doctorate in Fall 2019, Hyeoncheol (Charlie) Baik began his assistant professorship in Business Analytics, part of the Business Studies program at Stockton.

Recently, Baik and three contributors published research in the Journal of Banking & Finance titled, “A Bank's Optimal Capital Ratio: A Time-Varying Parameter Model to the Partial Adjustment Framework.”

“In this publication, we examined bank capital structure before and after the 2007-2009 global financial crisis. To investigate the bank capital structure, we analyzed the panel data of the 15 largest U.S. bank holding companies (BHCs) for the period from 1996:Q1 to 2017:Q4,” Baik said. “Specifically, we proposed a panel version of the time-series Kalman filter algorithm to estimate the time-varying speed of adjustment (TV-SOA) of the time-varying parameter (TVP) model.”

Baik commented that their finding suggests that banks make faster capital structure adjustments under more stringent post-crisis regulatory reforms of capital requirements. They also found convincing evidence on a structural change in bank behavior in adjusting its capital ratio around the global financial crisis.

When asked why this publication was significant, Baik said, “We extend the existing literature by applying a time-varying parameter (TVP) model to a partial adjustment framework of bank capital structure. Doing so provides a way to obtain a more timely and on-going assessment of a bank’s behavior in adjusting its capital ratio to its optimal or target level.”

Baik’s work is deeply related to teaching Business Analytics at Stockton. “This would be a great example to show how we can utilize Big Data to understand business stakeholders’ behaviors responding to policy or market regimes change,” he said. “Also, this would be one of the empirical applications to support a theory in finance. Sharing my work with students would give some ideas or career plan on what/how business analysts work.”

Reported by Mandee McCullough

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