Bank Capital Ratios Across Countries: Why Do They Vary?

43 Pages Posted: 9 Sep 2008

See all articles by Elijah Brewer

Elijah Brewer

DePaul University - Department of Finance; Federal Reserve Bank of Chicago

George G. Kaufman

Loyola University Chicago

Larry D. Wall

Federal Reserve Bank of Atlanta - Research Department

Date Written: August 19, 2008

Abstract

This paper extends the literature on bank capital structure by modeling capital structure as a function of important public policy and bank regulatory characteristics of the home country, as well as of bank specific variables, country macro-economic conditions and country level financial characteristics. The model is estimated with annual data for an unbalanced panel of the 78 largest private banks in the world headquartered in 12 industrial countries over the period between 1992 and 2005. The results indicate that bank capital ratios are significantly affected in the hypothesized directions by most of the bank-specific variables. Several of the country characteristic and policy variables are also significant with the predicted sign: banks maintain higher capital ratios in home countries in which the bank sector is relatively smaller and in countries that practice prompt corrective actions more actively, have more stringent capital requirements, and have more effective corporate governance structures.

Suggested Citation

Brewer, Elijah and Kaufman, George G. and Wall, Larry D., Bank Capital Ratios Across Countries: Why Do They Vary? (August 19, 2008). Paolo Baffi Centre Research Paper No. 2008-28, Available at SSRN: https://ssrn.com/abstract=1264914 or http://dx.doi.org/10.2139/ssrn.1264914

Elijah Brewer (Contact Author)

DePaul University - Department of Finance ( email )

1 East Jackson Blvd.
Chicago, IL 60604-2287
United States

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

George G. Kaufman

Loyola University Chicago ( email )

820 North Michigan Avenue
School of Business
Chicago, IL 60611
United States
312-915-7075 (Phone)
312-915-8508 (Fax)

HOME PAGE: http://www.luc.edu/faculty/gkaufma/

Larry D. Wall

Federal Reserve Bank of Atlanta - Research Department ( email )

1000 Peachtree Street, NE
Atlanta, GA 30309-4470
United States
404-498-8937 (Phone)
404-498-8956 (Fax)

HOME PAGE: http://www.frbatlanta.org/econ_rd/bios/wall.htm

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