Author

  • David E. Allen

    • School of Accounting, Finance and Economics, Edith Cowan University, Western Australia
    • Australia

  • Napaporn Nilapornkul

    • School of Accounting, Finance and Economics, Edith Cowan University, Western Australia
    • Australia

  • Robert John Powell

    • School of Accounting, Finance and Economics, Edith Cowan University, Western Australia
    • Australia

Abstract

The aim of this study is to examine the determinants of the capital structure of Thai banks. The data spans a ten year period from 1999 – 2008. The differentiation point of this study is that, whereas most studies on capital structure focus predominantly on internal bank variables, this study, in addition to internal variables includes market-based risk variables. A range of market-based default and value at risk variables were considered which were then narrowed down to improve the model. Fixed effects panel data analysis is employed, with both market and book leverage used as dependent variables. The Thai bank study is benchmarked to Japanese and Malaysian banks. The study found that the significance of the market-based variables is greater for market leverage than for book leverage. The results can assist regulators and banks in understanding the impact of different market and internal variables on capital.

Keywords

References

  • Ali, K., Akhtar, M. F. & Sadaqat, S. (2011). Practical implication of capital structure theories: Empirical evidence from the commercial banks of Pakistan. European Journal of Social Sciences , 23(1), 165173.
  • Allen, D. E., Powell, R. J. & Singh, A. K. (2011). Using quantile regression to estimate capital buffer requirements for Japanese banks. Edith Cowan University. Perth.
  • Bank Negara Malaysia. (2011). List of Licensed Banking Institutions in Malaysia Retrieved 11 November 2010, 2011, from http://www.bnm.gov.my/index.php?ch=13&cat=banking&type=CB&fund=0&cu=0
  • Bank of Thailand. (1997). Supervision report 1996-1997 Retrieved 3 March, 2009, from http://www.bot.or.th/Thai/FinancialInstitutions/New_Publications/KeyDevFI/Supervision /Documents/SupervisionReport1997.pdf
  • Beeson, M. & Rosser, A. (1998). The East Asian economic crisis: a brief overview of the facts, theissues and the future. Working paper No.86. Asia Research Centre. Murdoch University. Perth, Western Australia.
  • Black, F. & Scholes, M. (1973). The pricing of options and corporate liabilities. The Journal of Political Economy, 81(3), 637-654.
  • Blankenburg, S. & Palma, J. G. (2009). Introduction: the global financial crisis. Cambridge Journal of Economics , 33, 531-538.
  • Caglayan, E. & Sak, N. (2010). The determinants of capital structure: Evidence from the Turkish banks. Journal of Money, Investment and Banking , 15, 57-65.
  • Chan-Lau, J. A., Jobert, A. & Kong, J. (2004). An Option-Based approach to bank vulnerabilities in Emerging Markets. Working paper 04/33. International Monetory Fund
  • Crosbie, P. & Bohn, J. (2003). Modeling default risk: Modeling methodology. 1-31. Retrieved from http://www.ma.hw.ac.uk/~mcneil/F79CR/Crosbie_Bohn.pdf
  • Eviews 7. (2009). Eviews 7 User's guide. the United States of America: Quantitative Micro Software, LLC. Gropp, R. & Heider, F. (2010). The determinants of bank capital structure. Review of Finance , 14(4), 587622.
  • Gujarati, D. (2011). Econometrics by example. New york: Palgrave Macmillan.
  • Haas, R. D. & Peeters, M. (2006). The dynamic adjustment towards target capital structure of firms in transition economics. Economics of Transition , 14(1), 133-169.
  • Harris, M. & Raviv, A. (1991). The theory of capital structure. Journal of Finance , 46(1), 297-355.
  • Japanese Banker's Association. (2011). Principle financial institutions Retrieved 12 December, 2011, from http://www.zenginkyo.or.jp/en/banks/principal/index.html
  • Juca, M. N., Sousa, A. F. D. & Fishlow, A. (2012). Capital structure determinant's of North American banks and the compensation executive program-An empirical study on the actual systemic crisis. International Journal of Business and Management , 7(17), 13-26.
  • Karunatilleka, E. (1999). The Asian economic crisis. (14). Retrieved from Economic policy and statistics section website:
  • Kawai, M. (2005). Reform of the Japanese banking system. Institute of Economic Research, Hitotisubashi University, Kunitachi, Tokyo.
  • Merton, R. C. (1974). On the pricing of corporate debt: The risk structure of interest rates. Journal of Finance , 2, 449 - 470.
  • Morgan, J. P. & Reuters, K. (1996). RiskMetricsTM—Technical Document. Morgan Guaranty Trust Company of New York. New York. Retrieved from http://www.faculty.idc.ac.il/kobi/RiskMGT/rmtd.pdf
  • Octavia, M. & Brown, R. (2010). Determinants of bank capital structure in developing countries: Regulatory capital requirement versus the standard determinants of capital structure. Journal of Emerging Markets , 15(1), 50-62.
  • Powell, R. (2007). Industry Value at Risk in Australia. Working paper, Edith Cowan University (ECU), Perth, Western Australia.
  • Rockafellar, R. T. & Uryasev, S. (2000). Optimization of Conditional Value-at-Risk. [working paper]. Journal of Risk , 2(3), 21-41.
  • World Bank. (2011). GDP growth rate (annual%) Retrieved 8 May, 2010, from http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?page=4

Downloads

No downloads have been recorded for this article yet. Figures appear here once readers begin downloading the full text.

How to Cite

Allen, D. E., Nilapornkul, N., & Powell, R. J. (2013). The Determinants of Capital Structure: Empirical evidence from Thai Banks. Information Management and Business Review, 5(8), 401-410. https://doi.org/10.22610/imbr.v5i8.1068

Share this article

License

Copyright (c) 2013 David E. Allen, Napaporn Nilapornkul, Robert John Powell (Author)

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

Author (s) should affirm that the material has not been published previously. It has not been submitted and it is not under consideration by any other journal. At the same time author (s) need to execute a publication permission agreement to assume the responsibility of the submitted content and any omissions and errors therein. After submission of revised paper in the light of suggestions of the reviewers, the editorial team  edits and formats manuscripts to bring uniformity and standardization in published material.

This work will be licensed under Creative Commons Attribution 4.0 International (CC BY 4.0) and under condition of the license, users are free to read, copy, remix, transform, redistribute, download, print, search or link to the full texts of articles and even build upon their work as long as they credit the author for the original work. Moreover, as per journal policy author (s) hold and retain copyrights without any restrictions.

Keywords

Section

Research Paper

Published in

Vol. 5 No. 8 (2013) Financial Modeling, Innovation & Banking Efficiency View issue contents

Published

2013-08-30

Submissions

Have research to publish? Information Management and Business Review welcomes submissions.

Make a Submission