No 1096 september 2009 this paper can be downloaded without charge from. In section 2 the potential determinants of capital structure are summarized and theoretical and empirical evidence concerning these determinants is provided. To optimize the capital structure, bank must combine the debt and equity. Several studies on the determinants of bank capital structure using explanatory variables are also used in examining the capital structure of nonbank companies such as amidu 2007, heider and. Based on a sample of 200 largest publicly traded banks from the us and fifteen eu countries from 1991 to 2004, they found that the average level of book capital ratios is 7. Bank capital structure, financial crisis, basel iii regulation. Abstract we examine the impact of capital structure determinants on firm financial performance together with the mediation effect of firm leverage in malaysia and indonesia over the period of 1990 to 2010. Determinants of bank capital structure the impact of basel iii may 2016 abstract this paper examines which determinants of bank capital structure are reliably decisive for 15 publicly traded european and american banks from 2006 to 2015.
The capital structure of a firm is some mix of debt, internally generated equity, and new equity. Capital structure, bank size, dividend payout, profitability, tangible assets, business risk, tax and banking industry introduction determinants of capital. Several researchers argue that the determinants of capital structure are significantly affected by factors such as the laws and regulations of the country, corporate and personal tax systems and corporate governance. The purpose of this study is to investigate the capital structure determinants of turkish deposit banks during the period of 20042011. Determinants of banks capital structure in asia a comparison amongst developed and developing countries. The strength of the standard corporate finance determinants of leverage, however. Kleff and weber 2004 examined the determinants of capital structure of.
In this respect, the empirical literature devoted to the analysis of a banks profitability has mostly focused on a monotonic linear relationship between the banks capital structure and its performance chaudhry et al. In section 1 the most prominent theoretical and empirical findings are surveyed. These include bank characteristics such as size, profitability, tangibility and macroeconomic factors, such as economic growth, stock market. University of birmingham bank level and country level. Most empirical studies that examine the determinants of capital structure have been done for developed or specific country and there is little evidence in subsahara africa. Determinants of capital structure in nonfinancial companies. One of the main determinants of a banks profitability is its capital structure. The objective of this paper is to examine whether capital requirements are indeed a firstorder determinant of banks capital structure using the crosssection and timeseries variation in our sample of large, publicly traded banks spanning 16 countries the united states and the eu. We examine the determinants of capital structure and funding sources of 347 large global banks between 1998 and 2016 from 57 countries around the world. The paper shows that mispriced deposit insurance and capital regulation were of secondorder importance in determining the capital structure of large u.
Come browse our large digital warehouse of free sample essays. The paper shows that mispriced deposit insurance and capital regulation were. Determinants of capital structure theoretical aspects corporate finance literature has focused on two broad categories of explanation for capital structure viz. Empirical evidence from the largest global banks 1. An organizations capital structure consists of longterm common stock, preferred stock and retains earning. Next, the research analyzes the determinants of the maturity structure of this debt. Several studies on the determinants of bank capital structure using explanatory variables are also used in examining the capital structure of non bank companies such as amidu 2007, heider and. Findings of heider and gropp 2010 shed new light on the debate over whether regulation or market forces determine capital structure of banks.
The determinants of bank capital structure in the world. Our results show that certain of the capital structure determinants directly affect firm financial performance. Capital structure is measured by leverage, which is derived from longterm debt divided by equity or shortterm debt divided by equity. The determinants of bank capital structure and the global financial crisis in turkey 57 well. The combination of debt and equity used to finance a companys projects is referred to as capital structure. The overall sample period is divided into two subperiods. Determinants of capital structure in nigerian banking sector.
The determinants of bank capital structure by reint gropp. It is therefore essential to study the emerging economies as individual countries rather than see them collectively as a group. Common factors of leverage such as pro t, size, growth, risk, asset structure. Instead, standard crosssectional determinants of nonfinancial firms leverage carry over to banks, except for banks whose capital ratio is close to the regulatory. These are the tradeoff, agency, contracting cost and information costs theories. Introduction capital structure refers to the way a firm finances its assets through some combination of equity, debt, or securities. Marques and santos provided evidence that the impact of taxation at the bank level, bankruptcy and financial distress are moderate influence on banks capital structure. The theory provides insight into a firms capital structure decision in a capital. The question of what determines banks capital structure still remains unanswered. The panel data analysis is applied to thirty banks in turkey. A study on determinants of capital structure in india. Reint gropp and florian heider september 2009 abstract the paper shows that mispriced deposit insurance and capital regulation were of second order importance in determining the capital structure of large u.
The paper employs panel regression approach to investigate capital structure impact on firms performance in morocco, based on the result of haussmann test, fixed effect fit the first model better. Evidence from commercial banks in ethiopia submitted by me for the award of the degree of master of science in finance and. Leverage for banks has been increasing ever since the beginning of. First, the paper analyzes the financial determinants for external funding and then it proceeds into the specific analysis of two main sources, bank debt and trade credit. Capital marketoriented versus bankoriented institutions.
We find that the capital structure of banks does not evolve only as a result of capital regulations, it is also affected by market forces. Determinants of capital structure univerzita karlova. Determinants of bank capital structure semantic scholar. This thesis expands research by analysing the capital structure determinants of 100 large listed european banks between 2004 and 2014. Read this essay on determinants of bank capital structure. Introduction banks constitute one of the most important groups of financial intermediaries. The determinants of the capital structure of listed on. Our paper highlights the importance of firmspecific determinants as compared to macroeconomic factors on capital structure decision of banks.
Determinants of capital structure in indonesian banking sector. The determinants of bank capital structure european central bank. The determinants of bank capital structure 1 by reint gropp 2 and florian heider 3 1 we are grateful to markus baltzer for excellent research assistance. Specifically, we use the five most relevant determinants of capital structure size, profitability, growth opportunities, risk and. This research examines five bankspecific factors i. Some evidence from banks abstract this paper documents that standard crosssectional determinants of firm leverage also apply to the capital structure of large banks in the united states and europe. The paper shows that mispriced deposit insurance and capital regulation were of second order importance in determining the capital structure of large u. The objective of this paper is to examine whether capital requirements are indeed a firstorder determinant of banks capital structure using the crosssection and timeseries variation in our sample of large, publicly traded banks spanning 16 countries the united states and the eu15 from 1991 until 2004. The internal factors considered are related to the banks capital structure, liquidity, credit risk, loan portfolio, asset quality, and expense management aspects whereas the external factors are related to the. The determinants of bank capital structure request pdf.
Empirical analysis introduction the sound financing practices of corporate sector in terms of the implication for future financing and thereby investment depends on capital structure. In a bankbased system, banks rely heavily on deposits while in a marketbased system. Researchers are still not agreed regarding the factors, which influence organizations capital structure, although plenty of research has been carried out which focus on primary determinants of capital structure. No 1096, working paper series from european central bank abstract. This paper approached the issues of capital structure by evidencing commercial banks in ethiopia to uncover the firm level determinant factors of capital structure. Determinants of bank capital structure in developing. Thirdly, a comparison of past and current evidence in terms of dutch institutional settings is presented.
The determinants of bank capital structure and the global. Earlier drafts of the paper were circulated under the title what can. Capital structure, a reading prepared by pamela peterson drake 1. So, conferring to market view regulatory requirement and buffer cant be first order determinants of bank capital structure as evident from gropp and heider 2010 and berg and gider 2017.
This study contributes in the existing literature by examining the determinants of capital structure of. The determinants of bank capital structure in europe. Ajanthan department of accounting, university of jaffna, sri lanka abstract purpose the aim of this study is to find out the factors that affect the capital structure of hotels and restaurant companies and. Evidence from hotel and restaurant companies in sri lanka a. Firms capital structure determinants and financing choice. Instead, standard crosssectional determinants of non.
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