Determinants of capital structure decisions among publicly listed Islamic banks
This research aims to examine bank specific, market and regulatory determinants of leverage and capital structure based on a panel data of publicly listed Islamic banks in 12 countries over the period 2008-2017. Apart from testing standard corporate finance parameters using both OLS and M-Estimat...
| Main Authors: | , |
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| Format: | Article |
| Language: | English English |
| Published: |
Growing Science
2019
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| Subjects: | |
| Online Access: | http://irep.iium.edu.my/79813/ http://irep.iium.edu.my/79813/1/79813_Determinants%20of%20capital%20structure%20decisions_article.pdf http://irep.iium.edu.my/79813/2/79813_Determinants%20of%20capital%20structure%20decisions_scopus.pdf |
| Summary: | This research aims to examine bank specific, market and regulatory determinants of leverage and
capital structure based on a panel data of publicly listed Islamic banks in 12 countries over the
period 2008-2017. Apart from testing standard corporate finance parameters using both OLS and
M-Estimators, this study adds several idiosyncratic and regulatory environment related determinants of leverage unique to Islamic banks. The significance of potential determinants is tested for
market and book leverage as well as newly introduced ‘Islamic banking leverage’. Overall, the
results show that Islamic banks with higher growth opportunities, tangibility, low profitability and
low risk are likely to have a high leverage. Similarly, the findings suggest important role played by
debt market conditions, share of investment accounts and regulatory environment in such decisions,
providing an evidence of the significance of trade-off and pecking order theory in capital structure
in Islamic banks. The results are more robust for market and Islamic banking leverage, rather than
book leverage. The findings offer insights to regulators, standard setters and especially Islamic
banks regarding parameters to strengthen their capital, enhance resilience and thus contribute to the
stability of relevant financial. This paper is among the few extant studies that focus on listed Islamic
banks and tests determinants based on stock market data. |
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