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Governance and bank’s capital structure: empirical evidence from a cross countries analysis

Governance and bank’s capital structure: empirical evidence from a cross countries analysis This paper examines the role of bank ownership structure on capital structure by (using the financial and ownership data from Caprio et al. (2007) that covered 244 banks across 44 countries). We classified banks across the countries with geographical regional dummies indicating if the banks are located in Asia, Africa and Latin America (the reference category being OECD countries). We find that family-owner managed firms tend to have a lower debt. In addition, excessive control right of the controlling owner may significantly increase bank leverage. We suggest that in a family-owner managed firms there should be more dilution of ownership so that minority are not exploited as too much loan may lower bank value. Thus, banks need to be better regulated as excessive leverage has been identified as one of the reasons for the current financial crisis. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png African Journal of Accounting, Auditing and Finance Inderscience Publishers

Governance and bank’s capital structure: empirical evidence from a cross countries analysis

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Publisher
Inderscience Publishers
Copyright
Copyright © Inderscience Enterprises Ltd. All rights reserved
ISSN
2046-8083
eISSN
2046-8091
DOI
10.1504/AJAAF.2014.066135
Publisher site
See Article on Publisher Site

Abstract

This paper examines the role of bank ownership structure on capital structure by (using the financial and ownership data from Caprio et al. (2007) that covered 244 banks across 44 countries). We classified banks across the countries with geographical regional dummies indicating if the banks are located in Asia, Africa and Latin America (the reference category being OECD countries). We find that family-owner managed firms tend to have a lower debt. In addition, excessive control right of the controlling owner may significantly increase bank leverage. We suggest that in a family-owner managed firms there should be more dilution of ownership so that minority are not exploited as too much loan may lower bank value. Thus, banks need to be better regulated as excessive leverage has been identified as one of the reasons for the current financial crisis.

Journal

African Journal of Accounting, Auditing and FinanceInderscience Publishers

Published: Jan 1, 2014

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