The Determinantand Speed Adjustment of Bank Capital Structure in Indonesia

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.