Institutional Environment and Bank Capital Ratios
71 Pages Posted: 24 Feb 2017 Last revised: 1 Oct 2018
Date Written: September 20, 2018
We investigate the influence of the institutional environment on bank capital ratios. Using a sample of 149 banks operating in the Middle East and North Africa region for the period 2004 to 2014, we find that, when stock markets have little presence, institutional variables significantly affect risk-weighted regulatory capital ratios but not leverage ratios. Conversely, when stock markets are more developed, only leverage ratios are influenced by institutional factors. Our results also indicate that institutional variables affect non-weighted equity-to-asset ratios of banks that are listed on a stock exchange. Our findings contribute to the bank capital structure literature and have important policy implications for developing countries.
Keywords: Bank Capital Structure, Institutions, Bank regulation
JEL Classification: G21, G28, G32
Suggested Citation: Suggested Citation