View : 125 Download: 25

Firm size and different priorities in capital structure policy

Title
Firm size and different priorities in capital structure policy
Authors
Lee S.W.
Ewha Authors
이석원
SCOPUS Author ID
이석원scopus
Issue Date
2015
Journal Title
Review of European Studies
ISSN
1918-7173JCR Link
Citation
vol. 7, no. 11, pp. 15 - 22
Keywords
Capital strengthFinancingFirm sizeInvestmentRegulation
Publisher
Canadian Center of Science and Education
Indexed
SCOPUS scopus
Abstract
The objective of this study is to empirically examine how the bank capital structure policy is related to bank asset size. More specifically, by partitioning the full sample banks into two groups, i.e., the group of larger asset size banks vs the group of smaller asset size banks, we examine whether there is any difference in the determinants of capital structure decision between the two groups. Based on a panel regression analysis for Korean banks over the sample period 2000-2008, this study finds that the determinants for capital structure are substantially different between the two groups. Asset size and profitability affect the capital structure of the two groups in the same way. However, small banks’ capital structure decision shows that their capital ratio is positively related to both loan ratio and nonperforming loan ratio. This implies that small banks appear to put higher priority on investment policy for future growth than financial policy. The positive relation between nonperforming loan ratio and capital ratio for small banks implies that small banks have the tendency to decrease their debt ratio with financial risk-management purpose when their risk status measured by nonperforming loan ratio is high. However, both loan ratio and nonperforming loan ratio turned out not to affect the capital structure decision of the group of large banks. Instead the proportion of outside shareholdings which is used as the measure of the bank ownership structure turns out to negatively affect the bank capital ratio. Overall, these results imply that small banks tend to consider their investment opportunities and risk status as important explanatory variables for the capital structure decision. In contrast, large banks put a priority on the ownership structure in making capital structure decision. These results may suggest that to achieve a stable capital healthiness of the banks which is one essential requirement for the safety and soundness of the banking industry, bank regulator may have to implement a discriminatory regulatory policy between the group of large banks and small banks. Ignoring bank asset size and different characteristics, and imposing a one-way capital-structure regulatory policy would not be effective in making capital structure of the banks sound and healthy. © Seok Weon Lee.
DOI
10.5539/res.v7n11p15
Appears in Collections:
스크랜튼대학 > 국제학부 > Journal papers
Files in This Item:
001.pdf(151.83 kB)Download
Export
RIS (EndNote)
XLS (Excel)
XML


qrcode

Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.

BROWSE