Capital Structure Determinants of MENA Banks

30 Pages Posted: 2 May 2019

See all articles by Iliya Komarev

Iliya Komarev

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

Sherine Farouk Abdel Al

Abu Dhabi University

Professor Sanjoy Bose

Abu Dhabi University

Date Written: April 1, 2019

Abstract

This study tests theoretical predictions about capital structure determinants in the rarely explored context of Middle Eastern and North African (MENA) banks. Differences in capital structure decisions between Islamic and conventional banks are also examined. We use a panel 116 banks over the post-crisis period, 2011-2015. The baseline results show that total and short-term debt ratios are positively affected by the bank’s size and growth rate but negatively affected by its profitability and liquidity. Conversely, the long-term debt ratio is negatively affected by the bank’s size and growth rate. However, the dynamic Arellano-Bond estimations suggest that current year debt ratios are mainly explained by their prior year (target) levels, and many traditional capital structure determinants, except growth rate and profitability, are weak. Moreover, Islamic banks seem to maintain similar capital structure as conventional banks but have their financing decisions affected by different determinants.

Keywords: Capital Structure, Islamic Banks, Conventional Banks, Leverage, Short-Term Debt, Long-Term Debt, Panel Data, Arellano-Bond System GMM, MENA

JEL Classification: G21, G32

Suggested Citation

Komarev, Iliya and Komarev, Iliya and Farouk Abdel Al, Sherine and Bose, Sanjoy, Capital Structure Determinants of MENA Banks (April 1, 2019). Available at SSRN: https://ssrn.com/abstract=3363621 or http://dx.doi.org/10.2139/ssrn.3363621

Iliya Komarev (Contact Author)

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

Sherine Farouk Abdel Al

Abu Dhabi University ( email )

Abu Dhabi

Sanjoy Bose

Abu Dhabi University ( email )

P.O. Box 59911
Abu Dhabi
United Arab Emirates

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