Beyond Basel: Capital Structure Decisions in European Banks
(2024) NEKN02 20241Department of Economics
- Abstract
- The empirical analysis conducted in this study explores the determinants of leverage thus capital structure formation in the European banking sector from 2012 to 2023. Utilizing a panel data regression methodology, we analyze relationships among key financial factors and apply the theory of capital structure to the results presented, accounting for regulatory constraints. Our findings underscore the applicability of traditional corporate finance literature in explaining the determinants of leverage in major European-based public banks. Notably, bank size exhibits a positive effect on leverage, while profitability is negatively associated with leverage. Furthermore, market risk demonstrates a negative correlation with leverage. Finally,... (More)
- The empirical analysis conducted in this study explores the determinants of leverage thus capital structure formation in the European banking sector from 2012 to 2023. Utilizing a panel data regression methodology, we analyze relationships among key financial factors and apply the theory of capital structure to the results presented, accounting for regulatory constraints. Our findings underscore the applicability of traditional corporate finance literature in explaining the determinants of leverage in major European-based public banks. Notably, bank size exhibits a positive effect on leverage, while profitability is negatively associated with leverage. Furthermore, market risk demonstrates a negative correlation with leverage. Finally, heightened market competition is associated with reduced leverage and an increase in the Tier 1 capital ratio. These findings further validate the significance of variables beyond regulation in explaining capital structure dynamics, thereby departing from the sole reliance on regulatory effects on the capital structure of large public banks in Europe. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9160018
- author
- Gobec, Luka LU and Karzis, Dimitrios LU
- supervisor
- organization
- course
- NEKN02 20241
- year
- 2024
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Capital structure, leverage determinants, bank leverage, market competition, Tier 1 capital, Basel regulation.
- language
- English
- id
- 9160018
- date added to LUP
- 2024-08-12 15:55:24
- date last changed
- 2024-08-12 15:55:24
@misc{9160018, abstract = {{The empirical analysis conducted in this study explores the determinants of leverage thus capital structure formation in the European banking sector from 2012 to 2023. Utilizing a panel data regression methodology, we analyze relationships among key financial factors and apply the theory of capital structure to the results presented, accounting for regulatory constraints. Our findings underscore the applicability of traditional corporate finance literature in explaining the determinants of leverage in major European-based public banks. Notably, bank size exhibits a positive effect on leverage, while profitability is negatively associated with leverage. Furthermore, market risk demonstrates a negative correlation with leverage. Finally, heightened market competition is associated with reduced leverage and an increase in the Tier 1 capital ratio. These findings further validate the significance of variables beyond regulation in explaining capital structure dynamics, thereby departing from the sole reliance on regulatory effects on the capital structure of large public banks in Europe.}}, author = {{Gobec, Luka and Karzis, Dimitrios}}, language = {{eng}}, note = {{Student Paper}}, title = {{Beyond Basel: Capital Structure Decisions in European Banks}}, year = {{2024}}, }