Firm-specific, industry-specific and macroeconomic determinants of commercial banks’ lending in Ethiopia: Panel data approach

Yitayaw, Mekonnen Kumlachew

doi:10.1080/23322039.2021.1952718

Cited by 2 publications

(4 citation statements)

References 40 publications

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“…According to the trade-off theory, a firm with highly volatile cash flows should avoid debt financing and have low debt capital (Bilen & Kalash 2020). Yitayaw (2021) argues that firms with more volatile cash flows face higher expected costs of financial distress and should use less debt. More volatile cash flows make it less likely that tax shields will be fully utilised.…”

Section: Riskmentioning

confidence: 99%

“…Despite the numerous studies conducted on the determinants of banks' capital structure, the majority of these studies used data from the developed nations with scant studies focusing on the determinant of bank capital structure within the African context. Moreso, the impact of Basel III in the developed countries may not apply to African countries because of the differences in the unique country fundamentals such as the political influence in the banking regulations and supervision, central bank legislation and independence, country size, Gross Domestic Product and risk rating, economic factors and local institutional factors such as bank size and operational jurisdiction among others in the African countries (Afinindy, Salim & Ratnawati 2021;Beck & Rojas-Suarez 2019;Bilen & Kalash 2020;Bogale 2020;Chiaramonte & Casu 2017;Neves et al 2020;Yitayaw 2021). These factors determine the adoption of the Basel III Accord within the African jurisdiction.…”

Section: Introductionmentioning

confidence: 99%

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The determinant of African banks’ capital structure: Basel III Accord or bank-specific factors?

Obadire

Moyo²,

Munzhelele³

2022

J. econ. financ. sci.

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Orientation: The decision to have an optimum mix of capital structure is an issue of concern for financial service firms as much as other firms.Research purpose: The study investigated the impact of the Basel III regulatory requirements and other bank-specific factors on African banks’ capital structure and ascertained which of these factors ultimately determines the capital structure decision.Motivation for the study: There is limited evidence of study conducted on banks’ capital structure determinants within the Basel III Accord framework in Africa.Research approach/design and method: This study employed panel data drawn from 45 listed banks from 6 African nations. The panel data regression model was fitted with the system generalised moment methods estimator.Main findings: The findings revealed that within a similar economic condition in the sampled African nations, the Basel III minimum capital requirements, bank risk and size play the most important role in shaping the observed capital structure decisions of African banks.Practical/managerial implications: The regulators including central and reserve banks of the sampled African nation, and CEOs should keep their leverage ratio within the Basel III leverage ratio threshold to monitor and curb the build-up of excess leverage and also pay significant attention to the minimum capital requirements, bank risk and size in order to have an optimum capital mix.Contribution/value add: The Basel III Accord has significant importance in the financing decisions of African banks as much as the bank-specific factors.

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Section: Riskmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

The determinant of African banks’ capital structure: Basel III Accord or bank-specific factors?

Obadire

Moyo²,

Munzhelele³

2022

J. econ. financ. sci.

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“…As a result of this, the global Basel regulation plays a crucial role in the financing decisions of banks. Yitayaw (2021), Lemma and Negash (2014), and Frank and Goyal (2009) added that, despite the capital regulation mandated by the BCBS, other factors can significantly impact its financing decisions. These factors are internal to the bank and reflect its unique characteristics, performance, and risk profile.…”

Section: Introductionmentioning

confidence: 99%

“…These factors are internal to the bank and reflect its unique characteristics, performance, and risk profile. Profitability, risk, size, stability, earnings volatility, and asset tangibility are popular factors that influence the financing decisions of banks (Yitayaw 2021;Lemma and Negash 2014).…”

Section: Introductionmentioning

confidence: 99%

An Empirical Analysis of the Dynamics Influencing Bank Capital Structure in Africa

Obadire,

Moyo,

Munzhelele

2023

IJFS

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Financial institutions, particularly banks, have long grappled with the dilemma of structuring their capital optimally. This process, commonly referred to as capital structure decision-making, is of paramount importance, especially within the financial services sector, where strict regulations are imposed by reserve and central banks in alignment with global Basel guidelines. This study unveils the key factors that determine the capital structure choices of African banks, using panel data encompassing 45 listed banks across six nations that had embraced the Basel III Accord spanning the years 2010 to 2019. The study used the system-generalised moment methods (sys-GMM) estimator to fit the formulated panel data regression model. The study findings showed positive associations between ZSCORE, an indicator of bank financial stability, and net interest margin ratio (NIMR) with bank leverage (TCTE). In addition, the results revealed positive correlations between earnings volatility (EV), profitability (P), and risk (R) with bank leverage (TDCE). This suggests that profitable banks are inclined to favour debt financing, a phenomenon driven by their ability to comfortably service debt obligations with free cash flows. This study’s overarching conclusion underscores the dominant influence of the Liquidity Coverage Ratio (LCR) on African bank capital structures. Whether assessing traditional or Basel III-prescribed measures of bank leverage, LCR consistently emerged as the primary determinant. This finding is of significant relevance to bank executives and regulators, offering them essential insights for informed decision-making by considering striking a balance between equity and debt financing based on financial stability, profitability, and risk profiles.

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Firm-specific, industry-specific and macroeconomic determinants of commercial banks’ lending in Ethiopia: Panel data approach

Cited by 2 publications

References 40 publications

The determinant of African banks’ capital structure: Basel III Accord or bank-specific factors?

The determinant of African banks’ capital structure: Basel III Accord or bank-specific factors?

An Empirical Analysis of the Dynamics Influencing Bank Capital Structure in Africa

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