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How Do Banks Determine Capital? Evidence from Germany

Author

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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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    9. Odunayo Magret Olarewaju & Joseph Olorunfemi Akande, 2016. "An Empirical Analysis of Capital Adequacy Determinants in Nigerian Banking Sector," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(12), pages 132-142, December.
    10. Katarzyna Kubiszewska, 2018. "Interdependence of Ratios in Banking Stability Pentagon (Wspolzaleznosc wskaznikow w Pieciokacie Stabilnosci Bankowej)," Research Reports, University of Warsaw, Faculty of Management, vol. 2(28), pages 65-79.
    11. Alessandra Dal Colle, 2011. "Finance–growth nexus: does causality withstand financial liberalization? Evidence from cointegrated VAR," Empirical Economics, Springer, vol. 41(1), pages 127-154, August.
    12. Mohammad Sofie Abdul Hasan & Adler Haymans Manurung & Bahtiar Usman, 2020. "Determinants of Bank Profitability with Size as Moderating Variable," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 10(3), pages 1-7.
    13. Talla M. Aldeehani, 2019. "The Effect of the 2008 Global Financial Crisis on the Capital Structures of Conventional and Islamic Banks in the Gulf Cooperation Council Region," International Journal of Economics and Financial Issues, Econjournals, vol. 9(2), pages 12-23.
    14. Memmel, Christoph & Raupach, Peter, 2010. "How do banks adjust their capital ratios?," Journal of Financial Intermediation, Elsevier, vol. 19(4), pages 509-528, October.
    15. Shahchera, Mahshid & Taheri, Mandana, 2017. "Liquidity Coverage Ratio, Ownership, Stability: Evidence from Iran," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 12(2), pages 175-191, April.
    16. Seba Mohanty & Jitendra Mahakud, 2021. "Causal Nexus Between Liquidity Creation and Bank Capital Ratio: Evidence from India," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 15(2), pages 205-237, May.
    17. Hani El-Chaarani & Zouhour El-Abiad, 2019. "Analysis of Capital Structure and Performance of Banking Sector in Middle East Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 9(2), pages 1-11.
    18. Mili, Mehdi & Sahut, Jean-Michel & Trimeche, Hatem & Teulon, Frédéric, 2017. "Determinants of the capital adequacy ratio of foreign banks’ subsidiaries: The role of interbank market and regulation," Research in International Business and Finance, Elsevier, vol. 42(C), pages 442-453.
    19. Khurram Iftikhar & Syed Faizan Iftikhar, 2018. "The impact of business cycle on capital buffer during the period of Basel-II and Basel-III: Evidence from the Pakistani banks," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 5(04), pages 1-20, December.
    20. Marek Giebel & Kornelius Kraft, 2024. "R&D investments under financing constraints," Industry and Innovation, Taylor & Francis Journals, vol. 31(9), pages 1141-1168, October.
    21. Weißbach, Rafael & Walter, Ronja, 2008. "A likelihood ratio test for stationarity of rating transitions," Technical Reports 2008,27, Technische Universität Dortmund, Sonderforschungsbereich 475: Komplexitätsreduktion in multivariaten Datenstrukturen.
    22. Oyebola Fatima Etudaiye-Muhtar & Rubi Ahmad & Taiwo Azeez Olaniyi & Bilqees Ayoola Abdulmumin, 2017. "Financial Market Development and Bank Capitalization Ratio," Paradigm, , vol. 21(2), pages 126-138, December.
    23. Nguyen, Quang Thi Thieu & Gan, Christopher & Li, Zhaohua, 2019. "Bank capital regulation: How do Asian banks respond?," Pacific-Basin Finance Journal, Elsevier, vol. 57(C).

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