Original Research

The determinant of African banks’ capital structure: Basel III Accord or bank-specific factors?

Ayodeji M. Obadire, Vusani Moyo, Ntungufhadzeni F. Munzhelele
Journal of Economic and Financial Sciences | Vol 15, No 1 | a742 | DOI: https://doi.org/10.4102/jef.v15i1.742 | © 2022 Ayodeji M. Obadire, Vusani Moyo, Ntungufhadzeni F. Munzhelele | This work is licensed under CC Attribution 4.0
Submitted: 01 January 2022 | Published: 26 October 2022

About the author(s)

Ayodeji M. Obadire, Department of Accountancy, Faculty of Management, Commerce and Law, University of Venda, Thohoyandou, South Africa; and, Department of Professional Accounting, School of Finance and Professional Studies, Botswana Accountancy College, Gaborone, Botswana
Vusani Moyo, Department of Accountancy, Faculty of Management, Commerce and Law, University of Venda, Thohoyandou, South Africa
Ntungufhadzeni F. Munzhelele, Department of Accountancy, Faculty of Management, Commerce and Law, University of Venda, Thohoyandou, South Africa


Share this article

Bookmark and Share

Abstract

Orientation: The decision to have an optimum mix of capital structure is an issue of concern for financial service firms as much as other firms.

Research purpose: The study investigated the impact of the Basel III regulatory requirements and other bank-specific factors on African banks’ capital structure and ascertained which of these factors ultimately determines the capital structure decision.

Motivation for the study: There is limited evidence of study conducted on banks’ capital structure determinants within the Basel III Accord framework in Africa.

Research approach/design and method: This study employed panel data drawn from 45 listed banks from 6 African nations. The panel data regression model was fitted with the system generalised moment methods estimator.

Main findings: The findings revealed that within a similar economic condition in the sampled African nations, the Basel III minimum capital requirements, bank risk and size play the most important role in shaping the observed capital structure decisions of African banks.

Practical/managerial implications: The regulators including central and reserve banks of the sampled African nation, and CEOs should keep their leverage ratio within the Basel III leverage ratio threshold to monitor and curb the build-up of excess leverage and also pay significant attention to the minimum capital requirements, bank risk and size in order to have an optimum capital mix.

Contribution/value add: The Basel III Accord has significant importance in the financing decisions of African banks as much as the bank-specific factors.


Keywords

capital adequacy ratio; capital buffer; leverage ratio; liquidity coverage ratio; panel data; theories of capital structure

Metrics

Total abstract views: 211
Total article views: 224


Crossref Citations

No related citations found.