Bank Capital Structure Dynamics and Covid-19: Evidence from South Asia

Mohammad, Khalil Ullah; Khan, Mohsin Raza

doi:10.52131/joe.2021.0302.0045

Cited by 2 publications

(2 citation statements)

References 35 publications

(61 reference statements)

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“…Interaction terms measure the moderation effect of Covid-19 on the independent variables' net interest margins relationship. Covid and interaction terms have been extensively used in the literature (Mohammad, 2021;Mohammad & Khan, 2021;Mohammad, Muhammad, & Muhammad, 2021).…”

Section: Methodsmentioning

confidence: 99%

The Moderating Role of Covid-19 on Determinants of Bank Spread

Mohammed

2022

PSSR

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This study investigates the moderating role of Covid-19 on the bank spreads in developing and developed economies. Based on the largest gross domestic product, the study employs unbalanced quarterly bank data of the largest five economies of Europe and South Asia using the Thomson Reuters DataStream database from 2016 to 2021. Generalized least squared dummy variable estimation is carried out. We find that typical determinants of bank spreads hold for both the developed and developing countries. Covid-19 is found to significantly impact bank spreads. However, we find that the impact in the case of Asia was a decrease in bank spreads while bank spreads were higher in the EU during covid-19. During the covid-19 crisis, the magnitudes of typical determinants increased for the case of South Asian banks. In the case, of EU banks the magnitude of bank spread determinants decreased. Evidence suggests an opportunity of arbitrage available to international banks to enter emerging markets and earn higher spreads. This would improve these countries' financial sectors, shrinking net interest margins and converging with those of developed countries.

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Section: Methodsmentioning

confidence: 99%

The Moderating Role of Covid-19 on Determinants of Bank Spread

Mohammed

2022

PSSR

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“…During a crisis such as the pandemic, it is expected for companies to experience increased business risk because of economic contraction (Mohammad & Khan 2021) causing a decline in profitability, growth and liquidity. It is also expected for older, bigger companies with more assets to raise debt easier, to support liquidity management and increase cash holdings (Almeida 2021;Bajaj, Kashiramka & Singh 2021;Kumar et al 2017).…”

Section: Capital Structurementioning

confidence: 99%

Capital structure and COVID-19: Lessons learned from an emerging market

Mouton¹,

Pelcher²

2023

Acta Commercii

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The impact of the lockdown restrictions on the retail industry was vast with firms having to act quickly to adapt. Importantly, for the retail industry, a level 5 lockdown meant that only essential goods were allowed to be sold (Ecim et al. 2020). Additionally, many retail businesses shut down completely during the level 5 lockdown period. Consumers were also moving towards buying online, which meant less spending in the actual shops. Other consequences of the pandemic and lockdown measures included COVID-19 regulations such as surface and hand sanitation as well Orientation: Coronavirus disease 2019 (COVID-19) and the subsequent lockdown regulations restricted ongoing trade for most retail firms. Business strategies had to be adjusted to avoid a grand challenge of insolvency.Research purpose: This paper provides previously unavailable empirical evidence of firmlevel capital structure and determinants in relation to the COVID-19 pandemic for the firms in the retail sector in an emerging market.Motivation for the study: Capital structure decisions, as influenced by the pandemic, provide novel value because such decisions are usually long-term, yet the volatile uncertainty of the pandemic negated the long-term cycle.Research design, approach and method: A correlational design was followed to identify and interpret how retail firms reacted during the initial lockdown period. This was completed using a quantitative method, doing statistical analysis to describe and interpret possible relationships. The secondary data ranged from 2009 to 2021 for 11 South African listed retail firms was collected from EquityRT® and INET BFA. Data were analysed using descriptive statistics and panel data analysis by Eviews 12 software. Main findings:The pandemic, measured using a dummy variable, was found to have a significant effect on capital structure together with risk, profitability, size and age. Liquidity, tangibility and growth were insignificant. Overall, capital structure proxied by the debt-equity ratio was reduced timeously without exhibiting dependence on short-term funds.Practical/managerial implications: The retail firms exhibited exemplary capital structure decision-making behaviour during the COVID-19 pandemic. Contribution/value-add:The empirical evidence of the effect of the COVID-19 pandemic on the capital structures and its determinants of retail firms in South Africa is the contribution of this study. Based on the findings, two conflicting capital structure theories (pecking order and trade-off theories) were part of the decision-making process, creating the cautious behaviour for these retail firms.

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Bank Capital Structure Dynamics and Covid-19: Evidence from South Asia

Cited by 2 publications

References 35 publications

The Moderating Role of Covid-19 on Determinants of Bank Spread

The Moderating Role of Covid-19 on Determinants of Bank Spread

Capital structure and COVID-19: Lessons learned from an emerging market

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