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The impact of capital structure on bank performace in emerging markets; empirical evidence from GCC countries

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  • Khan Shoaib

    (Department of Economics & Finance, CBA, University of Ha’il, Saudi Arabia)

Abstract

The current literature is equivocal and provides inconsistent evidence about the relationship between firms’ performance and capital structure choices. This study adds the empirical evidence on association between capital structure and bank performance to this inconclusive debate. It uses the data of commercial conventional banks listed on various stock exchanges of six Gulf Cooperation Countries (GCC) i.e. Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. The study uses unbalanced panel data of 50 banks operating in these countries during 2012 to 2017, having 299 bank year observations. ROA and ROE are used as performance variables, with total debt ratio as explanatory variables. Bank size, assets tangibility, earnings volatility, growth, GDP growth rate, and inflation rates are employed as control variables. Three regression techniques, pooled OLS, fixed effects and random effects estimations are used to explore the relationship. The results suggest leverage and the control variables have a substantial effect on the performance of banks but are distinctive in nature as per the banking industry compared to non-financial firms.

Suggested Citation

  • Khan Shoaib, 2022. "The impact of capital structure on bank performace in emerging markets; empirical evidence from GCC countries," Financial Internet Quarterly (formerly e-Finanse), Sciendo, vol. 18(1), pages 56-65, March.
    • Handle: RePEc:vrs:finiqu:v:18:y:2022:i:1:p:56-65:n:2
    DOI: 10.2478/fiqf-2022-0005
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    More about this item

    Keywords

    capital structure; banks; performance; Gulf Cooperation Council;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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