Bank‐level and country‐level determinants of bank capital structure and funding sources

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Authors

Abstract

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.

Details

Original languageEnglish
Pages (from-to)504-532
Number of pages29
JournalInternational Journal of Finance and Economics
Volume23
Issue number4
Early online date30 Jul 2018
Publication statusPublished - Oct 2018

Keywords

  • capital structure, crisis, deposit/nondeposit financing, global banks, speed of adjustment