Does bank affiliation affect firm capital structure? Evidence from a financial crisis

Abstract

PurposeThis study aims to assess the determinants of corporate debt with a particular focus on bank-affiliated and non-bank-affiliated firms during the global financial crisis.Design/methodology/approachThe authors analyse the data of 395 listed manufacturing firms from Pakistan with 2,370 firm-year observations. The sample is divided into subsamples, namely bank-affiliated, non-bank-affiliated and stand-alone firms. Fixed and panel effect regression models are applied to determine the during, pre-crisis and post-crisis effects on corporate capital structure.FindingsThe robust results of the study reveal that non-bank-affiliated firms have different leverage determinant behaviours with a greater reliance on size, tangibility and profitability. However, bank-affiliated firms seemed to show greater immunity from a crisis compared to other firms. Simultaneously, the stand-alone firms remained at a disadvantage subject to internal financial ties of group-affiliated firms and form a base of market imperfection.Practical implicationsThis study's findings imply that financial managers should contain better ties with financial institutions to enhance financial immunity in worse time of financial crisis or COVID-19 global calamity. On the regulation front, these findings call for critical policy regulations to govern the internal ties with financial institutions to create a level playing field for the corporate sector.Originality/valueTo the best of the authors’ knowledge, this study is the first to investigate determinants of corporate debt with a particular focus on bank-affiliated and non-bank-affiliated firms. This work is also novel to explore corporate debt of bank-affiliated and non-bank-affiliated firms during the financial crisis.

The Effect of Corruption and Money Laundering on Banking Profitability and Stability of Licensed Commercial Banks in Sri Lanka

“…Further, there is a significant impact of corruption on bank stability. According to empirical research findings Asteriua et al, (2020)found that corruption and transparency have a negative effect on bank profitability and bank stability, while Zaman et al, (2021) found consistent evidence that corruption has a positive relationship with the banking profitability of Pakistan and Malaysia.…”

“…In addition to that, according to the study's results, there is a significant impact of BSIZE on bank stability. According to Zaman et al (2021)it is indicated that there was significant impact of Money Laundering on bank profitability and stability.…”

“…In addition to that, according to the hypothesis developed by the researcher, there is a significant impact of MEF on bank profitability and there is a significant impact of MEF on bank stability. According to Zaman et al (2021)it is indicated that there was significant impact of Management Efficiency on bank profitability and stability.…”

“…Positivism is aligned with the hypothetico -deductive model of science (Park et al, 2020).Deductive research logic was used as research logic for this study. Most of the previous studies have been conducted using descriptive research design (Arshad & Rizvi, 2013;Zaman et al, 2021).…”

“…According to Zaman et al (2021), the important policy implications that arise from this research are that the bank managers should put strong corporate governance mechanisms to reduce the anti-corruption and AML practices in banks. This research study will be helpful for the Licensed Commercial Banks to enhance their knowledge in Corruption and ML on bank performance to mitigate their risk.…”