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Beyond Basel: Capital Structure Decisions in European Banks

Gobec, Luka LU and Karzis, Dimitrios LU (2024) NEKN02 20241
Department 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:
author
Gobec, Luka LU and Karzis, Dimitrios LU
supervisor
organization
course
NEKN02 20241
year
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}},
}