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Bank Capital Ratios Across Countries: Why Do They Vary?

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Author Info

  • Elijah Brewer III

    ()

  • George Kaufman

    ()

  • Larry Wall

    ()

Abstract

This paper extends the literature on bank capital structure by modeling capital structure as a function of important public policy and bank regulatory characteristics of the home country, as well as of bank-specific variables, country-level macroeconomic conditions, and country-level financial characteristics. The model is estimated with annual data from 1992 to 2005 for an unbalanced panel of the seventy-eight largest private banks in the world headquartered in twelve industrial countries. The results indicate that bank capital ratios are significantly affected in the hypothesized directions by most of the bank-specific variables. Several of the country characteristic and policy variables are also significant with the predicted sign: Banks maintain higher capital ratios in home countries in which the bank sector is relatively smaller and in countries that practice prompt corrective actions more actively, have more stringent capital requirements, and have more effective corporate governance structures.

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File URL: http://hdl.handle.net/10.1007/s10693-008-0040-9
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Bibliographic Info

Article provided by Springer in its journal Journal of Financial Services Research.

Volume (Year): 34 (2008)
Issue (Month): 2 (December)
Pages: 177-201

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Handle: RePEc:kap:jfsres:v:34:y:2008:i:2:p:177-201

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Web page: http://www.springerlink.com/link.asp?id=102934

Related research

Keywords: Capital requirements; Country public and regulatory policies; Large banks;

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References

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Citations

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Cited by:
  1. Laetitia Lepetit & Amine Tarazi & Nadia Zedek, 2012. "Ultimate Ownership Structure and Bank Regulatory Capital Adjustment: Evidence from European Commercial Banks," Working Papers hal-00918579, HAL.
  2. Maurin, Laurent & Toivanen, Mervi, 2012. "Risk, capital buffer and bank lending: a granular approach to the adjustment of euro area banks," Working Paper Series 1499, European Central Bank.
  3. Laetitia Lepetit & Amine Tarazi & Nadia Zedek, 2012. "Bank Regulatory Capital Adjustment and Ultimate Ownership Structure: Evidence from European Commercial Banks," Working Papers hal-00918577, HAL.
  4. Teixeira, João C.A. & Silva, Francisco J.F. & Fernandes, Ana V. & Alves, Ana C.G., 2014. "Banks’ capital, regulation and the financial crisis," The North American Journal of Economics and Finance, Elsevier, vol. 28(C), pages 33-58.
  5. Jacopo Cimadomo & Sebastian Hauptmeier & Tom Zimmermann, 2012. "Fiscal Consolidations and Banking Stability," Working Papers 2012-32, CEPII research center.
  6. Cimadomo, Jacopo & Hauptmeier, Sebastian & Zimmermann, Tom, 2013. "Fiscal consolidations and bank balance sheets," Working Paper Series 1511, European Central Bank.
  7. John Harding & Xiaozhong Liang & Stephen Ross, 2013. "Bank Capital Requirements, Capital Structure and Regulation," Journal of Financial Services Research, Springer, vol. 43(2), pages 127-148, April.
  8. Maria Th. Kasselaki & Athanasios O. Tagkalakis, 2013. "Financial soundness indicators and financial crisis episodes," Working Papers 158, Bank of Greece.
  9. Julien Clavier, 2011. "Transition aux normes comptables IAS/IFRS, discipline de marché et adéquation des fonds propres aux risques dans l'industrie bancaire européenne," Post-Print hal-00646838, HAL.
  10. Pascal Barneto & Georges Gregorio, 2011. "Normes IFRS et mesure de la performance. Étude comparative auprès des établissements bancaires européens," Post-Print hal-00646454, HAL.
  11. Douglas Evanoff & Haluk Unal, 2008. "Introduction to the Special Issue: The Bank Structure Conference through the years," Journal of Financial Services Research, Springer, vol. 34(2), pages 93-97, December.
  12. Clovis Rugemintwari, 2010. "Investigation on the Comparative Persistence and Convergence of Risk and Non-Risk Adjusted Bank Capital Ratios," Working Papers hal-00916749, HAL.
  13. Etienne Bordeleau & Allan Crawford & Christopher Graham, 2009. "Regulatory Constraints on Bank Leverage: Issues and Lessons from the Canadian Experience," Discussion Papers 09-15, Bank of Canada.
  14. Thomas Hemmelgarn & Daniel Teichmann, 2013. "Tax Reforms and the Capital Structure of Banks," Taxation Papers 37, Directorate General Taxation and Customs Union, European Commission.

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