Despite the fact that a preponderance of past studies in corporate finance mainly focus on capital
structure decision of firms, the problems of “what factors determine the capital structure choice
of firms and how firms adjust their capital structure dynamically” are still riddling. Hence, the
aim of this study is to investigate the determinants of capital structure and capital structure
adjustment dynamics of banks. To this end, the study employed a quantitative research approach.
Specifically, secondary data have been collected through document review of annual reports of
selected banks for longitudinal/panel research design. Besides, primary data have been collected
through a self- administered questionnaire distributed to the selected Chief Financial Officers
(CFOs) for the cross-sectional survey research design of the study. As the method of data
analysis, the study estimates both static and dynamic panel models using fixed effect and
GMM estimators respectively. Besides, in analyzing the cross-sectional survey responses,
appropriate statistical techniques for order-ranked and nominal/categorical items of the responses
have been employed. Specifically, in the univariate analysis of survey responses, mean
scores and percentage of categorical responses have been computed for order-ranked and nominal
items respectively. Moreover, to test the significance of differences of mean scores of
order-ranked and percentage of responses of nominal items conditional on bank characteristics, the
study employed the nonparametric Mann-Whitney test and the likelihood ratio test respectively. As
the result, the tax shield from interest tax deductibility, profitability and/or size of
free cash flows, growth opportunities and regulatory pressure factors are found to be
significant determinants of capital structure decisions, consistently in estimations of panel
models and cross-sectional survey. In
iii
examining the capital structure adjustment dynamics, both the regression estimation and survey
results revealed the tendency of banks in Ethiopia to set target capital structure and adjust
towards it at a relatively faster speed of adjustment. Besides, both regression model estimation
and survey results disclose the asymmetrical target capital structure adjustment of banks. To be
specific, overleveraged or undercapitalized banks adjust more quickly than underleveraged
or overcapitalized banks. Further, the speed of target capital structure adjustment is found to be
heterogeneous across banks that differ in their absolute deviations from target capital structure,
size, regulatory pressure for capital adequacy and ownership. Hence, by empirically examining the
determinants and dynamics of capital structure of banks in Ethiopia, the study contributes to the
existing body of knowledge on the subject under study, and/or it fills a gap in the existing
reference literature on the subject. Most importantly, the study tries to untangle the capital
structure issues of banks, especially the dynamics, in the context of the least developed financial
system where there are no secondary market and oligopolistic banking sector. / Graduate School of Business Leadership (SBL) / D.B.L.
Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:unisa/oai:uir.unisa.ac.za:10500/22766 |
Date | 09 1900 |
Creators | Teramaje Walle Mekonnen |
Contributors | Duressa, Degefe. |
Source Sets | South African National ETD Portal |
Language | English |
Detected Language | English |
Type | Thesis |
Format | 1 online resource (xiii, 221 leaves) : color illustrations |
Page generated in 0.0156 seconds