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Determinants of Capital Structure in Financial Institutions: The Case of Turkey

  • Yakup Asarkaya
  • Serkan Özcan

This study analyzes the determinants of capital structure in the Turkish banking sector. We propose an empirical model in order to identify the factors that explain why banks hold capital beyond the amount required by the regulation. We used a panel data set that employs bank-level data from the Turkish banking sector covering the period 2002–2006 and estimated the model with generalized method of moments (GMM). The findings of this study suggest that lagged capital, portfolio risk, economic growth, average capital level of the sector and return on equity are positively correlated with capital adequacy ratio and share of deposits are negatively correlated with capital adequacy ratio.

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File URL: http://www.bddk.org.tr/WebSitesi/turkce/Raporlar/BDDK_Dergi/3885makale5.pdf
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Article provided by Banking Regulation and Supervision Agency in its journal Journal of Banking and Financial Markets.

Volume (Year): 1 (2007)
Issue (Month): 1 ()
Pages: 91-109

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Handle: RePEc:bdd:journl:v:1:y:2007:i:1:p:91-109
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Web page: http://www.bddk.org.tr/WebSitesi/turkce/Raporlar/BDDK_Dergi/BDDK_Dergi.aspx
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  1. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2002. "Instrumental variables and GMM: Estimation and testing," North American Stata Users' Group Meetings 2003 05, Stata Users Group.
  2. Allen N. Berger & Richard J. Herring & Giorgio P. Szego, 1995. "The role of capital in financial institutions," Finance and Economics Discussion Series 95-23, Board of Governors of the Federal Reserve System (U.S.).
  3. Jinyong Hahn & Jerry Hausman, 2002. "A New Specification Test for the Validity of Instrumental Variables," Econometrica, Econometric Society, vol. 70(1), pages 163-189, January.
  4. Joseph G. Haubrich & Paul Wachtel, 1993. "Capital requirements and shifts in commercial bank portfolios," Economic Review, Federal Reserve Bank of Cleveland, issue Q III, pages 2-15.
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