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Bank‐level and country‐level determinants of bank capital structure and funding sources
Author(s) -
Hoque Hafiz,
Pour Eilnaz Kashefi
Publication year - 2018
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.1635
Subject(s) - capital structure , leverage (statistics) , capital adequacy ratio , creditor , bankruptcy , economics , financial system , monetary economics , profitability index , bank regulation , capital requirement , corporate finance , business , finance , debt , market economy , machine learning , computer science , incentive
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. 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. We find that bank capital structure corresponds to corporate finance theory and buffer view and, in particular, that market‐to‐book ratio, size, and risk are positively related and that profitability is negatively related to bank leverage. Banks in countries with higher tax advantages, creditor rights, deposit insurance, and bankruptcy codes have more leverage, and those bound by common law have less leverage. Size and country‐level factors are important determinants of sources of financing.