An Investigation of the Capital Structure Policy of Egyptian Banking Sector Firms

38 Pages Posted: 6 Apr 2014

See all articles by Sherine Farouk Abdel Al

Sherine Farouk Abdel Al

Abu Dhabi University

Professor Sanjoy Bose

Abu Dhabi University

Iliya Komarev

EMLYON Business School - Casablanca Campus ; Abu Dhabi University - College of Business

Date Written: April 5, 2014

Abstract

This research examines the relationship between capital structure and three of its major determinants proposed in the prior literature - profitability, growth rate and size. Our sample includes data for all banks listed in Kompass Egypt, in the period 1995-2007. We utilize panel data regression analysis and show that the total debt ratio is negatively affected by both the bank's return on assets and its earnings growth rate. However, in contrast with the prior literature, the size of the Egyptian banks (measured by total assets) is a weak predictor of their capital structure. Interestingly, only 10% to 20% of the total debt ratio variances are explained by profitability and growth rate, the rest being due to company-related and stable in time idiosyncrasies. Our results differ when we attempt to explain short-term and long-term debt with the same determinants.

Keywords: capital structure, banks, panel data, Egypt, profitability, growth rate, size, ratio analysis

JEL Classification: G21, G32, C33

Suggested Citation

Farouk Abdel Al, Sherine and Bose, Sanjoy and Komarev, Iliya, An Investigation of the Capital Structure Policy of Egyptian Banking Sector Firms (April 5, 2014). Journal of Accounting, Ethics and Public Policy, Vol. 15, No. 2, 2014, Available at SSRN: https://ssrn.com/abstract=2420751

Sherine Farouk Abdel Al

Abu Dhabi University ( email )

Abu Dhabi

Sanjoy Bose (Contact Author)

Abu Dhabi University ( email )

P.O. Box 59911
Abu Dhabi
United Arab Emirates

Iliya Komarev

EMLYON Business School - Casablanca Campus ( email )

23 Avenue Guy de Collongue
Ecully, 69132
France

Abu Dhabi University - College of Business ( email )

PO Box 59911
Abu Dhabi, Abu Dhabi 59911
United Arab Emirates

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