Bank Level and Country Level Determinants of Bank Capital Structure and Funding Sources

Hoque, Hafiz; Kashefi-Pour, Eilnaz

doi:10.2139/ssrn.2648129

Cited by 8 publications

(9 citation statements)

References 31 publications

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“…In summary, the minimum capital requirement by the central bank, support by the central bank as a last resort and insurance of deposits constitute other reasons that could replace the requirement of tangible assets as collateral. These results are in line with the findings of Baltacı and Ayaydın (2014), Sheikh and Qureshi (2017) and Hoque and Pour (2018).…”

Section: Discussion Of Empirical Resultssupporting

confidence: 92%

“…This mitigates the agency problems between shareholders and managers that arise because of managerial opportunism or shirking. Several studies concluded that profitability is negatively related to leverage, which endorses the assumptions of pecking order theory, including Titman and Wessels (1988), Rajan and Zingales (1995), Wald (1999), Booth et al (2001), Viviani (2008), Sheikh and Wang (2013), Sheikh and Qureshi (2017) and Hoque and Pour (2018).…”

Section: Literature Reviewmentioning

confidence: 62%

“…Sheikh and Qureshi (2017) reported a positive relationship between bank size and book leverage in Islamic and conventional banks in Pakistan. According to Hoque and Pour (2018), bank size and country-level factors are important determinants to explore the financing structure.…”

Section: Literature Reviewmentioning

confidence: 99%

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Determinants of capital structure of banks: evidence from the Kingdom of Saudi Arabia

Khan

Bashir

Islam

2020

IMEFM

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Purpose The purpose of this study is to investigate the most important factors that affect the capital structure of commercial banks in the Kingdom of Saudi Arabia. Design/methodology/approach This study uses annual data of 11 Saudi commercial, national banks listed on the tadawul Saudi stock exchange for the period 2010–2017. Data was collected from the banks financial statements, tadawul annual publications and Saudi Arabian Monetary Authority. By constructing a balanced panel, this study uses pooled ordinary least squares regression along with fixed effects and random effects to examine the relationship between the bank’s book leverage as the dependent variable and bank-specific explanatory variables that include profitability, tangibility, earnings volatility, growth opportunities and bank size, while controlling for macroeconomic conditions. Findings The findings of this study suggest that banks in Saudi Arabia are highly leveraged, endorsing the fact that the nature of banks’ business is different from non-banking firms. Earnings volatility, growth and bank size show positive and significant relations with book leverage. Profitability and tangibility are negatively related to the book leverage. Empirically, the explanatory variables profitability, earnings volatility, tangibility, growth and bank size have material effects on the capital structure decisions of Saudi commercial banks. In summary, the determinants of capital structure for Saudi banks are the same as those of non-financial firms but are distinctive in nature. Research limitations/implications An extensive study on all the banks operating in Gulf Cooperation Council (GCC) countries is suggested. Practical implications The findings have practical implications for bank managers, which will help them to identify the bank-specific factors affecting the capital structure and choose the values enhancing optimal capital structure. The results of this study can assist regulatory agencies to formulate an effective regulatory framework. Moreover, the findings lay a foundation for the development of financial sector under the umbrella of the Vision 2030 program in the Kingdom. Originality/value To the best of the authors’ knowledge, this is the first study to explore the factors affecting the capital structure choices of commercial banks operating in the Kingdom of Saudi Arabia. Moreover, the findings of the study would prove useful in detailed studies of capital structure in the GCC countries as well.

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Section: Discussion Of Empirical Resultssupporting

confidence: 92%

Section: Literature Reviewmentioning

confidence: 62%

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Determinants of capital structure of banks: evidence from the Kingdom of Saudi Arabia

Khan

Bashir

Islam

2020

IMEFM

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“…It is shown that liquidity risk has reverse impacts on bank performance in a market‐based financial system. Hoque and Kashefi Pour (2018) examine the determinants of capital structure and funding sources of 347 large global banks between 1998 and 2016 from 57 countries around the world. They find that the capital structure of banks is affected by market forces as well as it evolves as a result of capital regulatory framework.…”

Section: Literature Reviewmentioning

confidence: 99%

The determinants of performance in the Eurozone banking sector: Core versus periphery Eurozone economies

2019

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In the present study we provide a thorough analysis of the effects that a group of bank‐specific as well as industry‐specific determinants along with the regulatory framework developed under the three pillars of Basel II agreement (capital stringency, official disciplinary power and private monitoring) have on the performance of Eurozone banking sector over the period 2007–2016. To this end, we conduct a systematic comparative analysis of the determinants of the performance of the banking sector in periphery Eurozone countries (Greece, Italy, Portugal, Spain) versus banks operating in core Eurozone economies (Germany, France). We provide evidence that is consistent with the argument that banks financed with short‐run capital market funding are more fragile. A further finding of our analysis shows that banks operating in countries which have a more restrictive regulatory framework on banking activities perform better. In addition, it is shown that the better‐performing banks have more equity. Finally, the estimation of the appropriate dynamic models we argue that bank performance is affected by bank‐specific determinants like equity capital and bank size, while the regulatory framework as well as macroeconomic variables play a crucial role.

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“…Funding Sources for Banks Funds management in banks (Borisoff Alexander & Andrew Compton, 2015), commonly referred to as Manajemen Pasiva Bank in Indonesia, is very important given that banks are primarily funded (more than 90%) by parties outside the bank owners (Mandala, 2004;Hoque, Hafiz and Kashefi-Pour, Eilnaz, 2015). The bulk of bank funding sources come from public savings (Third-Party Funds) in the form of demand deposits, savings and deposits.…”

Section: Consistent Withmentioning

confidence: 99%

Determinant of Capital Structure on Profitability and Share Prices of Banks Listed in Bursa Efek Indonesia (IDX)

Maesaroh¹

2019

IJO-BS

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The aim of the study is to find out the determinant of capital structure on profitability and share prices of banks listed on IDX. The study used Path analysis. Results indicated an insignificant effect of capital structure (5.4%), and yet significant effect of profitability (49.3%), both on stock prices, which included a direct effect (50.7%) and indirect effect (1.4%). Through profitability as a moderator variable, the effect of DER and DAR on share prices was-15% and-3.1%, respectively. This study has documented how path analysis extended the scope of what affected the share prices. Future studies are expected to broaden this scope still further and reveal effect patterns for other variable(s) not previously observed. The selection of other variables that can affect the stock price which results in 94.6% is not observed in this study

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Bank Level and Country Level Determinants of Bank Capital Structure and Funding Sources

Cited by 8 publications

References 31 publications

Determinants of capital structure of banks: evidence from the Kingdom of Saudi Arabia

Determinants of capital structure of banks: evidence from the Kingdom of Saudi Arabia

The determinants of performance in the Eurozone banking sector: Core versus periphery Eurozone economies

Determinant of Capital Structure on Profitability and Share Prices of Banks Listed in Bursa Efek Indonesia (IDX)

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