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How Do Banks Determine Capital? Evidence from Germany

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  • Kleff Volker

    (Centre for European Economic Research (ZEW), Mannheim, Germany)

  • Weber Martin

    (University of Mannheim, Mannheim, Germany)

Abstract

We analyse whether the determinants of capital found in the previous literature hold for the special German banking sector comprising three characteristic banking groups including savings banks, cooperative banks and other banks, which differ regarding their ownership and their access to the capital market. Through the use of accounting data from German banks between 1992 and 2001 we find evidence in accordance with the buffer theory of capital for all German banking groups. Furthermore, we also detect some remarkable differences between the three banking groups regarding their determination of capital due to institutional characteristics.

Suggested Citation

  • Kleff Volker & Weber Martin, 2008. "How Do Banks Determine Capital? Evidence from Germany," German Economic Review, De Gruyter, vol. 9(3), pages 354-372, August.
    • Handle: RePEc:bpj:germec:v:9:y:2008:i:3:p:354-372
    DOI: 10.1111/j.1468-0475.2008.00437.x
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