Open AccessTheory of capital structure decision: Overview of the banking industry
Author(s) -
Peter Yao Lartey,
Santosh Rupa Jaladi,
Stephen Owusu Afriyie
Publication year - 2022
Publication title -
frontiers in management and business
Language(s) - English
Resource type - Journals
ISSN - 2717-5340
DOI - 10.25082/fmb.2022.01.003
Subject(s) - capital structure , pecking order theory , economic capital , economics , profitability index , capital adequacy ratio , business , corporate governance , capital call , market liquidity , position (finance) , financial capital , financial economics , monetary economics , finance , individual capital , microeconomics , profit (economics) , debt
The relevance of capital structure decision in the banking sector is documented in this paper. It contributes to existing literature in a review of previous empirical studies and fundamental theories of capital structure. The study underscored the factors influencing the choice of funding in connection with the market timing theories such as Pecking Order theory and the trade -of - theory. Our investigation suggest that, the choice of capital vary across sectors and industries on the basis of business risks, corporate governance, profitability, internal controls, and efficiency. The study observed that most empirical researchers universally endorsed asset structure, industry volatility, corporate taxes and firm growth as strong determinants of capital structure. The above issues may either improve the solvency position of a form or trigger major financial distress depending on the source of capital.