Asset Allocation, Capital Structure, Theory of the Firm and Banking Performance: A Panel Analysis

N. Ozatac and K. K. Gökmenoglu (eds.), Emerging Trends in Banking and Finance, Springer Proceedings in Business and Economics, DOI/10.1007/978-3-030-01784-2_3

22 Pages Posted: 29 Nov 2018

Date Written: November 29, 2018

Abstract

This paper attempts to measure the "optimality of bank financial structure", in terms of the "theory of the banking firm" under constraints of liquidity and capital adequacy. This has been conducted using Lagrange function to assess the optimal weights of assets that include cash, governmental investments, loans, non- governmental investments and other assets, and the optimal weights of liabilities that include deposits, equity and other liabilities.

The paper argues that "optimality of bank financial structure" may affect both of "financial stability" and "banking efficiency". This has been conducted using a sample of 15 MENA countries, over the period from the 2006 to 2015. Using panel analysis according to GMM technique, results indicate that hypotheses regarding the significance of these impacts could be accepted.

Results indicate that each of "assets optimality" and "liabilities optimality" may affect "banking efficiency", while they may NOT affect "financial stability". Besides, the suggested index of financial structure optimality may affect each of "banking efficiency" and "financial stability".

Keywords: bank efficiency, capital adequacy, Data Envelopment Analysis (DEA), financial structure, liquidity, optimality, regulation, stability, theory of banking firm

Suggested Citation

Alber, Nader, Asset Allocation, Capital Structure, Theory of the Firm and Banking Performance: A Panel Analysis (November 29, 2018). N. Ozatac and K. K. Gökmenoglu (eds.), Emerging Trends in Banking and Finance, Springer Proceedings in Business and Economics, DOI/10.1007/978-3-030-01784-2_3. Available at SSRN: https://ssrn.com/abstract=3292928 or http://dx.doi.org/10.2139/ssrn.3292928

Nader Alber (Contact Author)

Ain Shams University ( email )

Cairo
Egypt

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