The Determinantand Speed Adjustment of Bank Capital Structure in Indonesia
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First Published: July 25, 2018
Abstract
This study examine variables determinant of banks' capital structure based on predictions of the trade-off theory and the pecking order theory. Using a dynamic model estimated the average speed of adjustment towards the target leverage approximately 46 percent per year. Variables that generally tested as determinants of the capital structure of non-financial corporations are also significantly explained the bank's capital structure, ie growth opportunities, firm size, and collateral value of assets. In general, the trade-off theory is more powerful in explaining the bank's capital structure than the pecking order theory.
Abstract
This study examine variables determinant of banks' capital structure based on predictions of the trade-off theory and the pecking order theory. Using a dynamic model estimated the average speed of adjustment towards the target leverage approximately 46 percent per year. Variables that generally tested as determinants of the capital structure of non-financial corporations are also significantly explained the bank's capital structure, ie growth opportunities, firm size, and collateral value of assets. In general, the trade-off theory is more powerful in explaining the bank's capital structure than the pecking order theory.
