We examine the determinants of bank capital structure using a large sample of banks in the world. We find that banks determine their capital structure in much the same way as non-financial firms, except for growth opportunities. We also provide evidence that country-level factors, such as the legal system, bank-specific factors and economic conditions influence banks' capital decisions through their impacts on bankruptcy costs, agency costs, information asymmetry and liquidity creation. The results show that, besides the direct effects, there are indirect impacts of country-level factors on the decision of bank capital. Our results have potential policy implications for the on-going regulatory reform.
Tran, D. V., Hassan, M. K., Paltrinieri, A., Nguyen, T. D. U. C., THE DETERMINANTS of BANK CAPITAL STRUCTURE in the WORLD, <<THE SINGAPORE ECONOMIC REVIEW>>, 2020; 65 (6): 1457-1489. [doi:10.1142/S0217590820500010] [http://hdl.handle.net/10807/178019]
THE DETERMINANTS of BANK CAPITAL STRUCTURE in the WORLD
Paltrinieri, AndreaWriting – Review & Editing
;
2020
Abstract
We examine the determinants of bank capital structure using a large sample of banks in the world. We find that banks determine their capital structure in much the same way as non-financial firms, except for growth opportunities. We also provide evidence that country-level factors, such as the legal system, bank-specific factors and economic conditions influence banks' capital decisions through their impacts on bankruptcy costs, agency costs, information asymmetry and liquidity creation. The results show that, besides the direct effects, there are indirect impacts of country-level factors on the decision of bank capital. Our results have potential policy implications for the on-going regulatory reform.
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