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What do we know about bank capital structure?

Evidence from international data


Viet-Dung TRAN*
Isabelle GIRERD-POTIN
Pascal LOUVET

Abstract
We examine the determinants of bank capital structure using a sample of 569 large and publicly
traded banks in 26 developed and emerging countries over the period 2004-2013. We use simultaneously
two notions of capital ratio (risk- and non-risk based capital ratio) to provide a more comprehensive
analysis of banks capital decisions. Our study shows two important evidences. First, we find that banks
determine their capital structure in much the same way as non-financial firms, mainly using the riskinsensitive leverage ratio (equity over assets ratio). The evidence also shows size and profitability are
the two most reliable factors determining banks capital structure. Second, we observe the impacts of
country-level characteristics on banks financing choices through three sets: institutional characteristics,
banking industry and macroeconomic characteristics. Unlike other studies, we demonstrate that besides
the direct effects of country-specific factors, there are also indirect impacts as these country-level factors
affect the way in which bank-level determinants influence bank capital decisions. Our results have
potential policy implications for the on-going regulatory reform. The evidence suggests the recent
implementation of non-risk based leverage ratio (pillar I of Basel III) is supportive. However, since bank
financing decisions is not homogeneous across countries, national regulatory should adapt the Basel
agreement so that these rule become more consistent with its characteristic.

Key words: Bank capital, bank regulation, capital structure, leverage, risk
JEL: G21, G32

This version
12/15/2015

CERAG UMR CNRS 5820 - BP 47, 38040 Grenoble Cedex 9, France viet-dung.tran@upmf-grenoble.fr
IAE of Grenoble - CERAG UMR CNRS 5820 - BP 47, 38040 Grenoble Cedex 9, France Isabelle.Girerd@iaegrenoble.fr

IAE of Grenoble - CERAG UMR CNRS 5820 - BP 47, 38040 Grenoble Cedex 9, France Pascal.Louvet@iaegrenoble.fr
*

What do we know about bank capital structure?


Evidence from international data

Abstract
We examine the determinants of bank capital structure using a sample of 569 large and publicly
traded banks in 26 developed and emerging countries over the period 2004-2013. We use simultaneously
two notions of capital ratio (risk- and non-risk based capital ratio) to provide a more comprehensive
analysis of banks capital decisions. Our study shows two important evidences. First, we find that banks
determine their capital structure in much the same way as non-financial firms, mainly using the riskinsensitive leverage ratio (equity over assets ratio). The evidence also shows size and profitability are
the two most reliable factors determining banks capital structure. Second, we observe the impacts of
country-level characteristics on banks financing choices through three sets: institutional characteristics,
banking industry and macroeconomic characteristics. Unlike other studies, we demonstrate that besides
the direct effects of country-specific factors, there are also indirect impacts as these country-level factors
affect the way in which bank-level determinants influence bank capital decisions. Our results have
potential policy implications for the on-going regulatory reform. The evidence suggests the recent
implementation of non-risk based leverage ratio (pillar I of Basel III) is supportive. However, since bank
financing decisions is not homogeneous across countries, national regulatory should adapt the Basel
agreement so that these rule become more consistent with its characteristic.

Key words: Bank capital, bank regulation, capital structure, leverage, risk
JEL: G21, G32

1. Introduction
Banks are by nature firms, but they operate in a highly regulated industry. Due to their critical
role in the economy (Beck, Levine, and others [1999], Beck, Demirg-Kunt, and Levine [2010], Levine
[2005]), these financial institutions are subject to strict regulations. One of the essential parts of banking
regulation is capital regulation which involves fixing a minimum threshold of capital requirement for
banks. Thus, in a standard textbook, Mishkin (2000, p. 227) suggests that the bank capital decision
is decided by capital requirements of regulators [B]ecause of the high costs of holding capital, bank
managers often want to hold less capital than required by the regulatory authorities (p. 277).
Furthermore, banks benefit from the deposit insurance scheme1. Although this is an effective
measure to keep banks safe from fulfilling their transformation services (Diamond and Dybvig [1986]),
deposit insurance schemes come at the cost of moral hazard. With the flat insurance premium, banks
tend to increase the deposit rate to attract more funds to invest in risky assets. As their pay-off is
deterministic due to the deposit insurance system, depositors then lose the incentive to supervise banks
behavior, and this give rise to the moral hazard problem in banks. In an option pricing framework,
Merton (1977) describe this issue by developing the deposit insurance pricing model considering deposit
insurers (guarantors) issue a (European) put option on the assets of the banks which gives management
(banks) the right to sell those assets for the face value of deposits on the maturity date. In the case of
mispricing deposit insurance (flat insurance premium), banks tend to maximize the put option value to
bring the maximum value to shareholders. This comprises a deposit insurance subsidy, a surplus value
to shareholders transferred not from depositors but from tax payers. Thus, based on the explicit pricing
of deposit insurance, banks should use more debt within deposit insurance schemes (Keeley [1990]).
These two banking-specific characteristics have long been considered the main determinants of
banks capital decisions. If this were true, banks should have a similar level of capital which is close to
the capital requirement. Furthermore, one should expect that there is a little variation in capital ratios
across countries, especially for banks under a similar institutional framework as in Europe. And that is
one of reasons why banking firms are always excluded from the corporate finance studies related to
capital structure.
[Insert Figure 1 about here]
However, based on a sample of the 569 largest, publicly traded commercial banks in 26
developed and emerging countries during the period 2004-2013, we observe that there are large
variations in bank capital (Figure 1). A cross-country comparison in Table 1 reaches the same
conclusion despite the fact that these large financial institutions operate in the same or similar markets,
and thus are subject to quasi-similar forces. Furthermore, if we suppose a common level capital
requirement based on the Basel rules of 6%2 (Tier 1 ratio), the evidence demonstrates that most banks
hold excess Tier 1 capital. Previous studies demonstrate the same evidence, such as Alfon, Argimon,
and Bascuana-Ambrs (2004) for UK banks, Flannery and Rangan (2008) for US banks, Brewer Iii,
Kaufman, and Wall (2008) for European banks Therefore, this evidence suggests that capital
regulation and deposit insurance are not unique determinants of the bank capital ratio.
[Insert Table 1 about here]
In a seminal paper, Gropp and Heider (2010) suggest that capital regulation and deposit
insurance are not of primary importance in determining bank capital structure. The authors undertake
an examination similar to Rajan and Zingales (1995) borrowing extensively from the empirical literature
on non-financial firms to explain the capital decisions of banks. They conclude that there are
considerable similarities between the capital structure of banks and non-financial firms, i.e. banks seem
to optimize their capital structure in much the same way as firms do. Indeed, Gropp and Heider (2010)
study the impact of the five most relevant determinants of non-financial firms capital structure and
1

Berger, Herring, and Szeg (1995) list different types of safety net applied in banking system. However,
in the scope of this study, we focus on the deposit insurance scheme.
2
Minimum Tier 1 ratio becoming effective in 2015

show that the sign and significance of the effect of most variables on bank leverage are identical
compared to other studies in corporate finance. Only banks with capital close to the minimum capital
requirement are found to be under pressure from regulated capital requirements. This suggests stronglycapitalized banks will be affected less by regulatory pressure. Octavia and Brown (2010) support the
work of Gropp and Heider (2010) drawing on a study of developing countries. In an earlier study,
Flannery and Rangan (2008) suggest that the increase of capital holding is independently of regulatory
requirements in the 1990s. The authors argue this fact as a reflection of reduced government implicit
guarantees.
Recently, there has been a growing body of theories in the banking area that explain bank capital
decisions within the framework of non-binding regulation. One of them focuses on the disciplinary role
of debt (more precisely demandable debt). These studies focus on deposits as the main source of funding
of banks. Diamond and Rajan (2000), (2001) extending the idea of Calomiris and Gorton (1991) suggest
higher leverage is beneficial for banks. The authors argue that the fragility of bank leveraging is
necessary to solve the contracting problem in banking and for banks to fulfil their service in liquidity
creation. In their model, a chain of illiquidity could lead to a hold-up problem in raising funds because
neither borrowers nor lenders can commit respectively their human capital and specific skills to extract
the repayment from the entrepreneur on a loan. The consequence of this illiquidity chain could be
mitigated if banks summit to a fragile capital structure. Submitting to a fragile capital structure gives
depositors more confidence that banks will seek to force concessions from depositors and will repay all
the depositors demands. Deposits become then a desirable asset for investors who have the need for
liquidity even though loans are illiquid. In brief, theories emphasize the disciplinary role of debt in an
asymmetric information environment to reduce the agency problem and suggest banks should use less
capital in their structure to undertake liquidity creation. Other theories focus on the market competition.
In a competitive market, banks market power erodes, leading to a decrease in profit margins. Banks
have tendency to take excessive risks to compensate for profits erosion. The quality of the loan portfolio
deteriorates and banks have to generate greater loan loss reserves, which negatively affects the bank
capital ratio. This school of though is refered by Berger, Klapper, and Turk-Ariss (2009) as the
competition-fragility view. However, a decrease in competition does not necessary result in higher
capital in banking firms. Banks in a less competitive market charge a higher loan rate. Higher loans rate
induces borrowers to engage in more risky projects, leading to higher non-performing loans and finally
reducing bank capital (Stiglitz and Weiss [1981], Boyd and De Nicol [2005]). Berger, Klapper, and
Turk-Ariss (2009) refer to this as the competition-stability hypothesis. A recent theoretical work of
Allen, Carletti, and Marquez (2011) propose another explanation of competition on bank capital based
on market discipline literature which however arise from the asset side of bank balance sheet. The
authors argue that capital and loan rate are two alternative ways to encourage banks in monitoring, but
they are associated with different costs. Holding more capital leads to private cost for banks whereas
loan rate increasing affects negatively to firms. Borrowers then prefer banks to hold more capital since
holding more capital is considered to the bank willingness to monitor without imposing costs on
borrowers.
These theories as well as the empirical studies on the field contribute new views on the banks
capital decisions. Thus, the study on banks capital structure should deserve further investigations.
Moreover, with the goal of promoting a more resilient banks and banking systems, recent financial
regulatory reforms highlights the central role of bank capital as a buffer to absorb loss in stress periods.
Furthermore, the level of bank capital divides risky outcomes among shareholders, creditors and
probably government. Therefore, a better understanding of what determine the banks capital structure
is imperative for an effective capital regulation.
Against these backdrops, this study aims to investigate in a global context the determinants of
banks capital structure. In particular, we address two key following issues. First, we examine the banks
capital structure in a large range of developed and emerging countries. We start to analyze the banklevel determinants of capital structure as traditional empirical studies determining the leverage structure
in the corporate and banking literature highlight the role of firm-specific characteristics. Specifically,
we would like to investigate whether the traditional capital structure theories in corporate finance could
be applied in the case of banking context by using the five most relevance determinants of capital
structure (size, profitability, growth opportunities, risk and collateral) (Gropp and Heider [2010], Frank

and Goyal [2009]). We are also interested in what determinants are the most reliably signed and reliably
important for predicting banks capital structure
Second, we explicitly examine the impacts of the institutional environment in which banks
operate on their capital structure choices. Based on the prior literature, we use the following country
characteristics to investigate the impacts on banks capital structure decisions: (i) institutional
characteristics which reflect the type of legal system (type of law, creditor right protection), (ii) banking
industry characteristics (capital regulation, monitoring, deposit insurance schemes, market structure)
and (iii) macroeconomic characteristics (annual Gdp growth rate). In the robustness testing, we examine
the effect of national culture on bank financing choices. Our approach is explicitly to investigate to what
extent these country-specific determinants could moderate the relationship between banks
characteristics and the banks capital structure in addition to their direct effects.
Our research extends the existing literature in several ways. First, to the best of our knowledge,
this is the first cross-country study to detail the direct and indirect impacts of the country-specific factors
on the bank capital structure decisions. Previous international studies in the banking field do not
systematically introduce these indirect impacts. The closest of our paper in this direction is De Jonghe
and ztekin (2015), however they focus on the adjustment process of bank capital structure by analyzing
the adjustments costs and benefits.
Second, our findings extend the law and finance literature of La Porta et al. (1998), Djankov,
McLiesh, and Shleifer (2007) by adding new evidences underscoring the importance for studies to
incorporate the institutional characteristics. We also provide the first comprehensive evidences of
national culture by using Hofstede and Hofstede (2001)s dimensions as a missing piece to the puzzle
of capital structure. This study provides an update and more complete relationship between countryspecific variables and capital structure theories that explain capital decisions based only on firms level
factors.
Our last contribution is this paper uses simultaneously two types of bank capital (risk-based
capital ratio which is considered to comprise binding capital within the Basel II and non-risk based
capital ratio which is commonly used in corporate finance). This approach allows us to have a more
concrete view of banks behavior in determining their capital structure. Gropp and Heider (2010) focus
mainly on the non- risk based leverage ratio even the section VI of their study use the Tier 1 ratio as
dependent variable.
Our results have potential policy implications for the on-going regulatory reform. Our results
based on the analysis of bank behavior in determining two different types of capital suggest that the
recent implementation of leverage ratio (pillar I of Basel III) is supportive. However, since bank
financing decisions is not homogeneous across countries, national regulatory should adapt the Basel
agreement so that these rule become more consistent with its characteristic. Furthermore, our study
provides the evidence on the interaction between different pillars of Basel III. The pillar I (capital
regulation) is related to the bankruptcy costs whereas the pillar II and III (monitoring index) are related
to all the factors that influence the bank capital decisions (bankruptcy costs, agency costs, asymmetric
information). From an academic point of view, this study sheds light the role of capital regulation in
bank capital decision. Scholars who intend to build new theory on bank capital should include the
binding of capital regulation.
The rest of this paper is organized as follows: Section II describes the sample; section III outlines
the methodology and the results of the impacts of bank-level factors in determining bank capital
structure; section IV details the results for the country-level determinants of banks capital structure,
and section V concludes the paper.
2. Data
Our data come from many sources. Information on banks balance sheets and income statements
is from the Bankscope database of the Bureau van Dijk (BvD)3. We use consolidated accounts data, if

The financial information at the bank level in Bankscope database is presented in standardized formats,
after adjusting for differences in accounting and reporting standards. The data is converted to a universal format
using a globally standardized template derived from the country-specic templates. This universal format also

available, and otherwise the unconsolidated accounts data to avoid double counting. The information on
stock prices is extracted from Thomson One database, and the macroeconomic information comes from
the World Economic Outlook (WEO) of the International Monetary Fund (IMF) and the Global
Financial Development Database (GFDD) of the World Bank. We also use the Demirg-Kunt, Kane,
and Laeven (2014) deposit insurance database and the bank regulation and supervision of Barth, Caprio
Jr, and Levine (2013) to complete our data set. Finally, we complete the investigation on the impacts of
the institutional environment by borrowing the data of Porta et al. (1998), Djankov, McLiesh, and
Shleifer (2007).
The final sample covers the 569 largest, publicly traded commercial banks in 26 developed and
emerging countries. The initial sample contains 799 banks. We exclude all banks for which the Tier 1
ratio and the equity/asset ratio are not available. Furthermore, on choosing commercial banks as
criterion for selection in Bankscope, we observe that there are many banks with a ratio of net loans to
assets and market funding to liabilities equal to 0% and 100% respectively. Thus, we drop all these
banks from our sample to ensure that all banks studied are true commercial banks.
The period studied, from 2004 to 2013, allows us to gain the most recent overview of bank
capital structure, as well as other bank-specific characteristics. It also permits us to capture more
accurately the effect of Basel II on the choice of bank capital structure as we are concerned about the
implementation of the Basel rule in emerging countries. We recognize the implementation of Basel III
in most of these countries since 2011. However, there are many terms that are being tested and will be
officially effective in 2016 and later. We suggest that the recent implementation of Basel III do not
impact substantially on bank capital decisions. Finally, to prevent the impact of outlier variables, all
variables are winsorized at 1% on both the left and right tails.
We use two alternative notions of capital ratio in this study, which are two competing concepts
of capital. The first ratio which is the risk-based leverage ratio, takes account of the banks asset risk,
and divide Tier 1 capital by assets associated to risk-weighting. Many research demonstrate that banks
manipulate their risk-based capital ratio through their own model of risk management, and the last
financial crisis reinforces this belief since many bailout banks display compliance in the level of riskweighted capital ratio just before the crisis (Le Lesl and Avramova [2012], Bruno, Nocera, and Resti
[2015], Dietsch et al. [2015]). By contrast, the second notion of capital ratio is risk-insensitive capital
which is defined as equity over non-risk based exposure measure (total assets). This leverage ratio is
viewed under the same consideration of corporate finance. Regulators and researchers point out the
important of this non-risk based leverage ratio since the last financial crisis. We use both these two
measures in this study which allows us to clarify the bank behavior in determining their capital ratio.
Table 1 shows some additional summary statistics on bank capital ratios. On average, the banks
in our sample hold 11.68% of tier 1 capital and 8.70% of equity. This capital ratio varies according to
country, ranging from 9.04% (6.03%) to 14.40% (13.31%) for risk-based (non-risk based) capital. Banks
in emerging countries seem to hold more capital than those in developed countries. This can partially be
explained by the fact that the latter (predominantly European banks) have substantial assets size
compared to banks in emerging countries. Following Berger and Bouwman (2013), we split banks by
size class. Not surprisingly, bigger banks operate with less capital.
3. Bank-level characteristics and capital structure choice
In this section, we use the variables on which there is the most consensus in the corporate finance
and banking literature (Berger et al. [2008], Brewer Iii, Kaufman, and Wall [2008], Gropp and Heider
[2010]). There are growth opportunities (mtb), profitability (roa), size (size), collateral (collr), risk (risk),
and liquidity creation (ltg) as bank-level determinants. Appendix 1 recaps the definition and Table 1
presents the summary statistics of bank-level characteristics per country.
[Insert Table 1 about here]

provides standard nancial ratios, which can be used for comparisons across banks from different countries
(Teixeira et al. [2014]).

For example, the countries that have the largest size of banks are France, Australia, and Italy;
those with a high proportion of non-performing loans include Greece, Bulgaria, and Egypt. The
countries with the highest values of collateral are Spain and France whereas those with lowest values of
collateral are Bulgaria, Australia. Size is the variable that exhibits the lowest cross-country variation
whereas profitability exhibits the highest variation.
3.1. Baseline hypotheses
In corporate finance, there is no universal theory to explain the mix of financing sources, but
there are some conventional theories, namely the trade-off and the pecking order theories. These theories
explain the firm capital structure based on the impacts of several factors such as bankruptcy costs,
agency costs and asymmetric information.
According to the bankruptcy costs hypothesis (Kraus and Litzenberger [1973]), banks adjust
their leverage to the extent that the marginal value of tax shields of each additional dollar of debt is
offset by the financial distress costs for each decreased dollar equity. Thus, we expect that the
bankruptcy costs have positive effects on bank capital decisions. Empirical studies usually use the
following proxies: (i) size (greater size lowers the bankruptcy risk, and thus large banks hold less
capital); (ii) collateral (higher collateral indicates lower risk for investors and reduced direct costs of
bankruptcy); (iii) risk (high-risk banks face higher volatility in earnings as well as increased financial
distress costs, leading to higher capital). Therefore, we test the following (bank-level) hypotheses (BH).
We use the natural logarithm of total asset and the ratio of impaired loans over gross loans as proxies of
bank size and risk respectively. Following Gropp and Heider (2010), we measure the collateral as the
proportion of total securities, government securities, cash and due from banks and fixed assets over
gross loans.
BH-1
BH-2
BH-3

Bank size has a negative effect on the bank capital ratio


Collateral has a negative effect on the bank capital ratio
Risk has a positive effect on the bank capital ratio

Agency costs are introduced based on Jensen and Meckling (1976), who emphasize the conflicts
of interest between different agents of firms. The first type of conflict is between managers and
shareholders. Managers do not capture the entire gain from the enhancement of activities, although they
bear all consequences of these activities. They then tend to consume perquisites instead of maximizing
the firms value. The use of debt mitigates the agency costs of free cash-flow problems (Jensen [1986])
as (i) it increases the portion of equity owned by managers leading to higher gains captured by managers,
and (ii) it commits firms to repaying debts, leading to fewer resources to spend to be spent on managers
pursuits. The second type of conflict is between shareholders and debtholders as shareholders tend to
invest sup-optimally. Indeed, shareholders benefit from upside gain from risky investments but they do
not bear the cost of downside losses. Thus, they will invest in risky projects even if this decreases the
value of debts. Anticipating this asset-substitution problem, debtholders increase the cost of debt, thus
leading to higher interest rates and lowering the firm value. This asset-substitution effect is an agency
cost of debt financing (Harris and Raviv [1991]). Empirical studies use growth opportunities and
collateral as proxies. With high growth opportunities, banks should face to greater conflicts between
shareholders and debtholders, leading to higher capital holdings. High values of collateral could mitigate
the risk of debtholders. Hence, banks with high collateral should have less capital. The effect of collateral
is tested in BH-2.
BH-4

Growth opportunities have a positive effect on the bank capital ratio

The introduction of asymmetric information to explain capital structure is based on the idea that
insiders have private information about firms that outsiders do not have. In the presence of asymmetric
information, banking firms may be reluctant to issue external finances that are severely undervalued by
the market. Indeed, the market will interpret the issuing of equity as bad news about banking firms and
the equity issued will likely be underpriced by virtue of the adverse inference. A positive net present
value (NPV) project could be rejected in the case that investors capture more than the NPV of the project,
leading to underinvestment problems. According to pecking-order theory (Myers and Majluf [1984],
7

Myers [1984]), internal resources are preferred by firms. Debt should first be used in the case of a need
for external funds due to their lower verification costs and issuing equity is the last resort. It is common
to use profitability and growth opportunities to test the consideration of asymmetric information. Highly
profitable banks have more retained earnings, and thus have more capital. High growth banks have
higher investments opportunities, and thus should hold less capital. However, empirical studies in
corporate finance often find the positive relationship between growth opportunities and capital ratio;
therefore we test the effect of growth opportunities as mentioned in BH-4. Following convention in the
literature, we use the market-to-book ratio which is considered as the best for growth opportunities
(Adam and Goyal [2008]) and the return on assets ratio as an index of profitability.
BH-5

Profitability has positive effects on bank capital ratio

Based on the banking literature, we test the effects of liquidity creation on the bank capital ratio.
Calomiris and Kahn (1991), Diamond and Rajan (2000), (2001) suggest banks with a fragile capital
structure create more liquidity. Another strand based on the risk absorption of capital argues that banks
should have more capital to undertake their liquidity creation (Berger and Bouwman [2009]). Allen and
Santomero (1997), Allen and Gale (2004) suggest that banks suffer high risk with the liquidity creation.
Capital is considered as a buffer to absorb risk, and thus banks with higher capital create more liquidity
(Bhattacharya and Thakor [1993], Coval and Thakor [2005], Horvth, Seidler, and Weill [2013]). As
banks in our sample operate in countries subject to strict regulations, we posit on the positive relationship
between bank capital and liquidity creation. Due to the lack of data, we compute the liquidity creation
as the difference between liquid liabilities and assets over the total assets instead of four measures of
bank liquidity creation proposed in Berger and Bouwman (2009).
BH-6

Liquidity creation has positive effects on bank capital ratio

Table 2 summarizes all hypotheses concerning the effect of bank-specific variables on the
banks choice of capital. Appendix 1 summarizes definitions and sources of these bank-specific
variables. Table 1 shows some additional summary statistics on our variables of interest to light up the
determinants of cross-sectional heterogeneity in capital ratios. Bigger banks hold more collateral than
their smaller counterparts whereas smaller banks have higher profitability, growth opportunities and
they are also riskier. Medium banks create more liquidity than other counterparts. Furthermore, banks
in emerging countries hold more collateral, and have higher profitability and growth opportunities, and
are riskier than those in developed countries. We also observe that banks in developed countries are
bigger and create more liquidity.
[Insert Table 2 about here]
3.2. Methodology
Following de Jong, Kabir, and Nguyen (2008), ztekin (2015), we process two types of
regression: (i) country-by-country regression (the separation method) and (ii) regression on the whole
sample (the pooled method). The separated regressions allow full heterogeneity in parameter estimates
and error variances while the pooled regression forces homogeneity in slope and error variance across
countries. The country-by-country regression, however, sets aside any possibility of a similarity in
institutional environment between countries. Used simultaneously these two methods allow a more
robust investigation of the impact of the determinants of bank capital structure. The equations are as
follows:
K ijt = oj + 6k=1 kj Xijt + i (Separation method)
K ijt = 0 + 6k=1 k Xijt + i (Pooled method)

(1)
(2)

where Kijt denotes the bank capital ratio of bank i in country j at time t; X it is the vector of k (6) banklevel factors which are growth opportunities (mtb), profitability (roa), size (size), collateral (collr), risk
(risk) and liquidity creation (ltg); and ~. . (0; 2 ); 2 = 2 ; ( ; ) = 0. Equation (1)
8

represents the separation method in which we run country-by-country regressions whereas Equation (2)
depicts the pooled method with the whole sample regression.
We use panel data as we are able to control for the individual specific, time-invariant and
unobserved heterogeneity of each individual (bank), such as the business strategy, board management,
etc. By combining time-series and cross-sectional observations, the panel data give more informative
data, more variability, less collinearity among variables, more degree of freedom and more efficiency
(Baltagi [2008]).
Endogeneity is undoubtedly one of the most important and pervasive problems in corporate
finance (Roberts and Whited [2012]). Growing literature recognizes that these financial policy
determinants are jointly endogenous. Several studies have demonstrate the simultaneity in determination
between capital and risk (Jacques and Nigro [1997]), capital and performance (Berger [1995], Berger
and Bonaccorsi di Patti [2006]), capital and growth opportunities (Barclay, Marx, and Smith [2003],
Johnson [2003]) thus we have concerns about endogeneity. Moreover, in the following section, we
integrate the impact of country-level characteristics such as competition, capital regulation and that
could rise the endogeneity problems when these country characteristics depend on capital ratios. For
example, a large, well-capitalized bank merges with another bank, increasing its market power and
leading to lower competition in the markets. Banks with fewer capital on the other hand could increase
their risk-taking behavior, thus increasing competition. It could result a negative impact of capital on
competition.
Furthermore, endogeneity could arise in omitted variables and measurement errors. We
therefore cannot use the ordinary least square (OLS) estimation as endogeneity violates the most
important assumption of the exogeneity of regressors, leading to biased and inconsistent estimators. The
instrumental variable estimator allows to avoid the bias that the OLS estimator suffers in the presence
of endogeneity (Murray [2006]). We thus decide to use 2SLS, which involves selecting a set of
instrumental variables (IV) that are correlated with endogenous variables but uncorrelated with the error
terms in the structural equation.
It is worth noting that the consistency of the IV approach depends on the validity of the IV.
Indeed, in the case of weak instruments, 2SLS could generate biased estimates, even providing a less
accurate statistical inference than OLS estimates (Larcker and Rusticus [2010]). Due to the scarcity of
available instrumental variables, empirical researchers usually use lags of firms variables for
identification. To test the validity of the IV, we consider the Hansen J test which is a test of
overidentifying restrictions with the null hypothesis of the validity of IV.
3.3. Results
The results are exhibited in Table 3, Table 4 for the risk- and non-risk based ratio respectively,
with the last row depicting the results of the pooled regression and the remaining rows showing those
of the separation method.
[Insert Table 3, Table 4 about here]
3.3.1. Pooled regression
We draw some general conclusions. For the whole sample regression, all variables are generally
significant (at the 1% level). Furthermore, the Hansen J test confirms the validity of the instrumental
variables.
Whereas all standard determinants of corporate finance are statistically significant, we find three
determinants have a similar sign for both measures of capital as expected: size (BH-1), risk (BH-3), and
profitability (BH-5). Indeed, profitable and riskier banks tend to use more capital, whereas larger banks
tend to use less capital. Another possible explanation of the negative relationship between size and
capital structure is based on the monitoring intensity in the model of Allen, Carletti, and Marquez (2011).
As larger banks have comparative advantages in lending technologies based on hard quantitative
information that require less monitoring (Berger et al. [2005]). Therefore, according to Allen, Carletti,
and Marquez (2011)s model, larger banks should hold less capital since there are less commitment to
monitoring and attracts creditworthy borrowers. Furthermore, smaller banks could have a limited skills
in risk management to compared with their larger counterparts, regulators therefore force them to hold
more capital to cover better losses in the worst case.
9

We obtain the opposite sign in the case of growth opportunities (BH-4) with high growth
opportunity banks found to hold less capital. These results confirm the findings of Gropp and Heider
(2010)4 and Octavia and Brown (2010) in their studies of developed and developing countries
respectively. A potential explanation for this negative relationship is that as banking firms are highly
regulated, the opportunistic behavior of banks mangers/shareholders is controlled, reducing the
discretion over firm projects and debt-related agency costs (Smith Jr. and Watts [1992]). Therefore, high
growth banks use less capital.
One interesting finding is the opposite sign of collateral in the case of the risk- and non-risk
based capital ratio. Indeed, we observe that the more collateral banks hold, the smaller is the equity over
assets ratio (consistent with BH-2) and the larger is the tier 1 ratio. This finding confirms the results of
Gropp and Heider (2010). These two (opposing) results are not surprising, as the banks in our sample
have more than 40% of their assets as collateral weighted as low risk under regulatory requirements.
Thus, high collateral banks have a higher Tier 1 ratio. Another possible explanation for this positive
relationship is given Grossman and Hart (1982) who focus on the perquisites of managers. The managers
of highly leveraged firms do not have incentives to consume more than the optimal perquisites as these
firms are closely monitored by creditors. The agency costs may be higher for low collateral firms
because the monitoring of such firms is more difficult (Grossman and Hart [1982]). Therefore, low
collateral firms tend to use more debt, submitting to higher monitoring from creditors, and leading to
lower perquisite consumption on the part of managers. However, we should note that the coefficient of
collateral in this case is marginal (-0.02) 5, which can be explained by the fact that with a high proportion
of collateral, the marginal effect of having one extra dollar of collateral to secure debt could be
substantially reduced (Octavia and Brown [2010]).
Liquidity creation is found to have a negative impact on bank capital decisions, inconsistent
with BH-6. This finding confirms the results of Horvth, Seidler, and Weill (2013), Lei and Song (2013).
Moreover, as our sample contains the largest banks in each country, this finding is contrary to that of
Berger and Bouwman (2009) which suggests a negative relationship is more linked to small banks.
3.3.2. Separated regression
For the separated regressions, we first observe that the adjusted R-squared looks reasonable,
varying significantly across countries. For the risk-based capital ratio (Tier 1 ratio), we find that the Rsquared ranges from 1.6% to 89.1%; however, most countries exhibit a high R-squared value. Similarly,
for the non-risk based capital ratio, we also find a high ranking of significant R-squared, which ranges
from 7% to 91%.
Second, quite half of the coefficients are statistically significant and consistent with the results
obtained above. For the risk-based capital ratio , the cross-sectional regressions yield as many as 15, 14,
14, 16, 11, and 11 significant coefficients (over 25 regressions6) for respectively collateral (60%), size
(56%), profitability (56%), growth opportunities (64%), risk (44%) and liquidity creation (44%).
Similarly, for the non-risk based capital ratio, we obtain 11, 18,15,10,12 and 15 significant coefficients
for respectively collateral (42%), size (69%), profitability (58%), growth opportunities (38%), risk
(46%) and liquidity creation (58%) over 26 regressions (see Table 5 ).
3.3.3. Relevant determinants of bank capital structure
Following ztekin (2015), we assess the relative importance of these bank-level determinants
in bank capital structure decisions by investigating their explanatory power. Table 5 depicts the
relationships between bank-level determinants and the bank capital ratio using the country-by-country
(separated) regressions and the regression on the whole sample (pooled regression).
[Insert Table 5 about here]
Panel A (B) depicts the results for the risk- (non-risk) based capital ratio. The first two columns
of each panel report the number and the proportion over the total significant coefficient in parentheses)
4

In the section VI where the authors use the Tier 1 ratio as dependent variable.
For comparison with the coefficients of other regressors.
6
As Egypt does not have enough observations, we have only 25 regressions.
5

10

of countries for which the given determinants have a particular sign at the 90% confidence level at least.
For example, there are 14 countries (over 15 countries that have significant coefficients, i.e. 93%) for
which collateral has positive and significant impact on the Tier 1 ratio, and only 1 country (i.e.7%) that
experiences a negative and significant impact. Column (3) shows the number of countries with
significant coefficients for the given determinants, and the proportion over the total regressions (25 and
26 respectively for the risk- and non-risk based capital ratio). Similarly, columns (4) and (5) report
whether the given determinants have a particular sign at the 90% confidence level at minimum. In other
words, if the given determinant is of a particular sign and statistically significant at a 90% confidence
level or higher, we assign it a score of 1; determinants with insignificant coefficient estimates are
assigned a score of zero. For instance, by regressing the whole sample, we obtain a positive and
significant effect of profitability on the bank Tier 1 ratio, and thus assign a score of 1 to profitability.
Panels C and D report whether the given determinant is a core factor among bank-level
determinants of capital structure by requiring a minimum score of 13 (50% of 26 regressions) using the
separation method and a score equal to 1 using the pooled method. We require a reliable factor to be
significant with a consistent sign at least 50% of the time and for it to have the score of 1.
The results of factor selection show that size and profitability are dominant factors for both the
risk- and non-risk based capital ratio. Smaller banks and banks that are more profitable tend to hold both
more risk- and non-risk based capital ratio . We also find that collateral and growth opportunities are
reliable factors when banks determine their risk-based leverage ratio, whereas liquidity creation is
important for the non-risk based leverage ratio.
4. Country characteristics and capital structure choice
Corporate financing decisions are not only determined by firm-level characteristics, but also by
country-level factors. Numerous studies in corporate finance have demonstrated that the institutional
environment has an important impact on firm leverage decisions, and this leads to the firms behaviors
heterogeneity of financing policy across countries. In particular, Demirg-Kunt and Maksimovic
(1999) show that the large difference in the use of debt between developing and developed countries is
due to the discrepancy in the institutional environment. Giannetti (2003) reports the impact of some
institutional features on the capital structure of firms in European countries. Fan, Titman, and Twite
(2012) find the countrys legal system and the preferences of capital suppliers explain a significant
proportion of the variation in leverage and debt maturity ratios. Although these studies take into account
country fixed-effects through dummy variables, this approach still imposes the equality of coefficients
of explanatory variables across countries. Furthermore, as the sample contains a large number of
observations, there is a high probability of generating statistically firm-specific variables.
Empirical studies in the banking literature also confirm the impact of country-specific
determinants, however most of these studies include several variables, such as regulatory and
macroeconomic conditions (Gropp and Heider [2010], Kleff and Weber [2003], Octavia and Brown
[2010], Brewer Iii, Kaufman, and Wall [2008]). Recently, De Jonghe and ztekin (2015) have provided
an exhaustive study on bank capital management by investigating the sources of cross-country variation
in the banks speed of adjustment.
Previous studies have focused on the direct impacts of country-level factors. However, these
also affect to the bank leverage through another channel indirectly in that country-specific factors
affect the way in which bank-specific factors affect bank financing choices.
In this study, we investigate the impact of country-specific factors on bank capital choices
through two channels: direct and indirect. Drawing on the literature, we divide country-specific factors
into three sets: (i) institutional characteristics which reflect the type of legal system (type of law, creditor
right protection), (ii) banking industry characteristics (capital regulation, monitoring, deposit insurance
schemes, market structure) and (iii) the macroeconomic characteristics (annual Gdp growth rate).
The following sub-section presents the country-level variables used in this study. The next subsections show the hypotheses and the findings.
4.1. Definition of variables
All the banking-industry characteristics used here are taken from the survey of Barth, Caprio Jr,
and Levine (2013), except for the concentration index. This survey provides a large set of variables
11

related to banking regulation (activity regulation, capital regulation, supervisory measures, etc.). As it
is possible to examine the impact of these variables, such an approach would lead to biased results due
to the likelihood of correlation between these variables. We thus use first principal components to
produce a broader index for some institutional factors. Furthermore, principal component analysis also
allows reducing the dimensionality in the data with a little loss of information in the total variation these
variables are explaining.
First, we use the regulation proxy (regulation) as the first principal component of (i) the capital
regulation index (capreg) and (ii) the prompt corrective power (prompt) with factor loadings,
respectively, of 0.70 and 0.70 for these two indices. The first component - the capital regulation index
(capreg) - measures the capital held by banks and the stringency of regulations governing the nature of
the source of regulatory capital. The construction consists of two main ideas: (i) whether the capital
requirement reflects certain risk elements and deducts certain market value losses from capital before
minimum capital adequacy is determined, and (ii) whether certain funds may be used initially to
capitalize a bank and whether they are officially used. The capital regulation index (capreg) ranges from
0 to 10: the higher the index, the greater the stringency of capital regulation. The second component the prompt corrective power (prompt) - measures the levels of deterioration in bank solvency that result
in the imposition of automatic actions. The index ranges from 0 to 6, with a higher value indicating more
promptness in responding to problems.
Second, the monitoring variable (monitoring) is the first principal component derived from
three monitoring proxies: (i) the independence of the supervisory authority (indep) which reports the
degree of independence from political influence of the supervisory authority within the government and
the degree to which the supervisory authority is legally protected from the banking industry. The index
ranges from 0 to 3, with a higher value indicating greater independence; (ii) the private monitoring index
(pmi) (ranging from 0 to 12, with a higher value indicating greater empowerment of monitoring by
private investors), which measures whether there are incentives and abilities to monitor banks and exert
effective governance on the part of private investors; (iii) and the external governance index (egovern)
(ranging from 0 to 19, with a higher value indicating a greater degree of external governance), which
measures the degree to which the regulations facilitate external governance by debt and equity holders,
based on the strength of external audit, the transparency of financial statements, accounting practices,
and external rating and creditor monitoring.
Third, the deposit insurance schemes proxy (deposit) is the first principal components factors
from two proxies taken from Barth, Caprio Jr, and Levine (2013): (i) the deposit insurer power (dip)
measures the degree to which actions are taken to mitigate the risk-taking behavior of banks, such as the
power to intervene and examine banks, to access information from banking supervisors, to cancel or
revoke deposit insurance from any bank, and to take legal action for violation of laws, regulations, etc.
The index ranges from 0 to 4, with a higher value indicating more power for deposit insurers and thus
lower moral hazard in banks; (ii) the moral hazard index, which focuses on the sources of deposit
insurance funding (government, banks, or a combination) and the calculation of deposit insurance
premiums. The index ranges from 0 (i.e., lower mitigation of moral hazard) to 3 (i.e., greater mitigation
of moral hazard).
Similarly, we use principal components analysis to compute the proxy for the legal system
(legal). The legal system proxy is the first principal component derived from three proxies: (i) type of
law (law), which is a dummy variable taking the value of 1 if country is under common law, and 0
otherwise; (ii) creditor right protection (cred_right) is taken from the study of Djankov, McLiesh, and
Shleifer (2007) which developed that of La Porta et al. (1997), ranging from 0 (i.e., weak creditor rights)
to 4 (i.e., strong creditor rights), and measures the power of the creditor in the case of reorganization
(ability to seize collateral after a petition for reorganization is approved), or in the case of liquidating a
bankrupt firm; (iii) shareholder right (share_right), composed of the anti-director right index taken from
the study of La Porta et al. (1997), and ranging from 0 (i.e., weak shareholder rights) to 5 (i.e., strong
shareholder rights).
Finally, we use the widely used Panzar and Rosse (1987) H-Statistic as a proxy for competition
in the banking system. There are generally two different approaches to measure competition in banking
literature. The structural approach is based on the structure of the market with assumption on the
collusion of a few large banks, leading to higher prices than in competitive levels. Based on the
oligopolistic competition models, market concentration could be used to infer competition, a more
12

concentrated market is considered as less competitive. The alternative approach, on the other hand, is a
nonstructural way which relies to bank behavior to infer competition degree. H-Statistic is one of these
nonstructural techniques which is consider as a more appropriate measure of competition than other
proxies since it is derived from profit-maximizing equilibrium conditions (Claessens and Laeven
[2004]). The H-Statistic is the sum of elasticities of bank revenue with respect to input prices.
The annual growth rate of gross domestic product (gdp) is taken from the database of the World
Bank. Appendix 1 recapitulates the measurement of all country-level variables.
It is worth to note that there are quite no time variation in legal system and banking regulation
variables and this is common in the literature, because these variables do not change in short-run and
there is an ample of time lag after the change of these variables so that we could observe in banking
system.
4.2. Initial observations
We start by accessing the country effects for cross-country bank capital differences by dividing
our sample into two portfolios according to the median value of a given country-level determinant (weak
and strong, corresponding to below and above the median). The results are shown in Table 6.
[Insert Table 6 about here]
In general, we observe that banks in countries with stringent regulation, more effective
monitoring and the higher empowerment of deposit insurers have higher risk- and non-risk based capital
ratio than in countries with less stringent regulation, less effective monitoring and lower empowerment
of deposit insurers. In other words, the stringency of banking regulations pushes banks to be well
capitalized. However, we note that the differences are small. We also observe that banking firms hold
less capital in a competitive market than in a concentrated market.
Furthermore, banks in countries with better legal system tend to use more capital than those in
countries with worse legal systems. Similarly, this difference is relatively small. Finally, regarding
economic conditions, in good time, banks tend to use less tier 1 capital, whereas they hold more equity
over assets ratio in lean periods. However, the difference in the case of risk-insensitive capital ratio is
not significant.
4.3. Baseline hypotheses
4.3.1. Direct impact hypotheses
We first begin with the direct impact of the country-level variables, which means that these
variables exert a direct impact on long-run bank capital decisions. Based on the initial findings, we
suppose the following (direct) hypotheses.
First, we expect that better regulatory framework, i.e. better regulation, effective monitoring by
investors and high power on the part of deposit insurers will mean banks face to higher bankruptcy risks,
and thus hold more capital.
DH-1 Better regulatory framework (better regulation, more effective monitoring and high power of
deposit insurers) has a positive effect on bank capital.
Second, the impacts of the legal system on capital structure decisions seem to be more mixed.
Cho et al. (2014) divide these impacts into opposing views. The first relates to the supply side of financial
markets (i.e., investors), suggesting that a better legal system provides stronger creditor protection and
thus less risky debt, which implies that investors buy more debt issued. This view is strongly reflected
in the law and finance literature (La Porta et al. [1998]). The second view focuses conversely on the
demand side of financial markets (i.e. corporations), arguing that debt becomes more risky from the
perspective of debt issuers as they could face losing control in the case of financial distress. Rajan and
Zingales (1995) were among the first to focus on this point of view, suggesting that management could
be penalized heavily in the case of distress with the better protection of investors. In the case of such
regulated banking institutions, we posit that managers (and shareholders) have a tendency to avoid debt
due to the inherently high degree of leveraging of banking institutions, which could potentially lead to
systemic risk in the case of distress. Thus, we support the demand view of bank capital structure.
13

DH-2 A better legal system has a positive impact on bank capital.


Finally, we hypothesize that higher economic growth allows the accumulation of higher retained
earnings, thus leading to a positive impact on bank capital.
DH-3 Economic growth has a positive impact on bank capital.
4.3.2. Indirect impact hypotheses
We turn now to the second channel of the impact of country-level characteristics on bank capital
structure, namely indirect impact. This is the impact of country-specific characteristic on the way in
which bank-specific factors determine the bank capital structure. In other words, these country-specific
factors could attenuate or intensify the relationship between the bank-level determinants and capital
structure decisions.
Conventional capital structure theories provide three sets of firm-determinants of capital
structure: (i) bankruptcy costs with size, risk and collateral as proxies; (ii) agency costs with growth
opportunities, collateral as proxies; and (iii) asymmetric information with profitability, growth
opportunities as proxies (de Jong, Kabir, and Nguyen [2008], Gungoraydinoglu and ztekin [2011]).
From the banking literature, we add liquidity creation as an extra bank-specific determinant to
investigate the impact of country-level determinants on the effect of liquidity creation on bank capital
structure. From our perspective, liquidity creation could be considered a factor of financial distress costs
as banks that create more liquidity encounter higher bankruptcy risks. However, we would like to set
this apart as it is a determinant taken from the banking literature.
Beginning first with our main focus in this study, bank regulation characteristics, we expect
stringency that stringency in capital regulation will help to reduce the bankruptcy risk as well as the
agency problem in banks, and thus mitigate the role of these two aspects (bankruptcy and agency costs)
on bank capital structure. Better monitoring also leads to lower asymmetric information, and thus
investors will have easier to access to bank information and a greater ability to evaluate banks status.
IH-1 The stringency of capital regulation mitigates the effect of bankruptcy risk (size, collateral, risk)
on bank capital structure.
IH-2 The stringency of capital regulation mitigates the effect of agency problems (growth
opportunities, collateral) on bank capital structure.
IH-3 A better monitoring mitigates the impacts of asymmetric information (profitability, growth
opportunities) on bank capital structure.
Concerning the moral hazard problem arising from deposit insurance schemes, we expect that
the greater the power of deposit insurers, the lower the bank risk-taking behavior (moral hazard
problems), and the role of bankruptcy risk proxies (profitability, size, collateral) in determining capital
structure is thus mitigated.
IH-4 Greater empowerment of deposit insurers mitigates the effects of bankruptcy risks (profitability,
size, collateral, risk).
Regarding the market structure, according to the competitive-fragility view, a higher
concentration leading to higher profit margins due to higher market power, increases the bank franchise
value, thus inducing lower risk-taking behavior and lower bankruptcy risk in banks. Indeed, higher
market power allows banks to develop stricter relationship with firms, then decreasing the asymmetry
of information. This results in a higher quality of the bank loan portfolio (and higher stability for banks)
as banks can screen and differentiate borrowers to a greater extent (Berger, Klapper, and Turk-Ariss
[2009], De Nicol and Turk Ariss [2010]). Bank are then less concerned about the risk arising from
liquidity creation, and have incentives to increase liquidity creation by increasing both the volume of
loans and deposits (Horvath, Seidler, and Weill [2014]). As bank capital is lower in line with the liquidity
creation, higher market concentration strengthens the effect of liquidity creation on bank capital.
14

IH-5

Higher market concentration strengthens the impact of liquidity creation on bank capital.

In terms of institutional characteristics, La Porta et al. (1998) argue that the legal system affects
the financing decisions of firms by showing that common law provides better protection to outside
investors than civil law. Furthermore, Ergungor (2004) argues that civil-law courts are less effective
than their common-law counterparts in resolving conflicts because they have less flexibility in
interpreting the laws and creating new rules. We expect that a better legal system attenuates the impact
of bankruptcy risk on bank capital structure. Furthermore, a better legal system mitigates the agency
costs of debts, thus leading to higher debt contraction and lower use of equity.
IH-6 The legal system mitigates the effects of bankruptcy risk (size, collateral, risk) on bank capital
structure.
IH-7 The legal system mitigates the effects of agency costs determinants (growth opportunities,
collateral) on bank capital structure.
Economic growth will reduce the bankruptcy risk, mitigating the influence of bankruptcy risk
on bank capital structure. Furthermore, economic growth will favor the accumulation of retained
earnings, in turn mitigating the role of asymmetric information in influencing bank capital structure.
IH-8 Better economic conditions reduce the effect of bankruptcy risks (size, collateral, risk) on bank
capital structure.
IH-9 Better economic conditions reduce the effect of asymmetric information (profitability, growth
opportunities) on bank capital structure.
Table 2 summarizes the hypotheses of the direct and indirect effects of country-level factors on
bank capital structure.
To investigate the direct impacts of country-specific factors, we follow the method employed
by Gungoraydinoglu and ztekin (2011), performing the following regression for all banks in the
sample:
= + + + +

(3)

where i, j, and t denote banks, countries, and time respectively; Xijt is a vector of bank-level factors of
bank i in country j, including profitability (roa), growth opportunities (mtb), risk (risk), size (size),
collateral (collr) and liquidity creation (ltg); Yij is a vector of 7 country-level determinants of each
country j : competition (comp), regulation (super), monitoring (monit), deposit insurer power (dip),
economic conditions (gdp), and legal system (legal); Zijt is a vector of the interaction term between the
banks- and country-level determinants; uijt is the random error term. We perform the equation (3) for
each country-level determinant. To ease economic interpretation, we standardize all variables in
regression (3). Hence, could be interpreted as the average capital ratio of banks in the sample.
The term indicates the direct impacts of country-level factors on a banks capital structure,
whereas the term shows the indirect impacts. More precisely, denotes the effects of bank-level
characteristics on the way in which bank-level factors affect a banks capital structure ( ). If > 0
( < 0) and if > 0 ( < 0), the country-level determinants can be viewed as strengthening the
effect of bank-level determinants on bank capital structure, in which case the country-level and the banklevel variables are considered as complementary. In contrast, if > 0 ( < 0) and if < 0
( > 0), the country-level determinants can be viewed as mitigating the effect of bank-level
determinants on bank capital structure, and the country-level and bank-level variables are considered as
substitutive.
4.4. Direct impacts
Before interpreting the findings, we should note that even performing different regression, the
impacts of bank-level factors in Equation (3) are still economically and statistically significant, except
for several cases becoming statistically insignificant. This evidence demonstrates the relevance of the
bank-level factors chosen, and confirms the consistency of models (1, 2).
15

Table 7 shows the direct impacts of country-level determinants on bank capital structure
decisions (row 7, Panels A and B).
[Insert Table 7 about here]
First, we observe that country-level determinants do not have any direct impact on the choice
of bank Tier 1 capital (Panel A), but we do find in the case of the risk-insensitive capital ratio (Panel B).
Indeed, in countries with a high degree of competition and with stringent monitoring, banks tend to hold
more equity. Reflecting the economic importance of these coefficients estimates, one standard deviation
increased in monitoring index (1.279) and competition degree (0.159) leads to an increase in the riskinsensitive capital ratio of 1.93% and 0.12% respectively, with all other explanatory variables set at their
mean values. This finding partially confirms DH-1 in which we suppose a positive impact of banking
regulation on bank capital holding. The positive direct impact of competition degree on the bank capital
decision is aligned with the Allen, Carletti, and Marquez (2011) model and with the findings of Schaeck
and Cihak (2012) in their European sample. Indeed, as bank capital is observable, banks with higher
capital will attract more borrowers because holding more capital signals banks commitments to monitor
borrowers without imposing costs on them.
Banks use less equity in better economic conditions which is at odds with DH-3. Economically,
the coefficient estimate on economic conditions (GDP) indicates that one-standard deviation increase in
GDP (3.291) translates into 3.07% decrease in capital, holding all other explanatory variables constant
at their means. A possible explanation for this finding is that during periods of growth, with more
opportunities for investment, there is an increase in demand for loans from firms. Furthermore, under
such positive perspectives, banks tend to lend more, leading to a lowering the ratio of equity/assets.
4.5. The indirect impacts
Rows (8) to (13) in Table 7 show the indirect impacts of each country-level determinant on bank
capital structure. Columns (1) to (6) depict the impact of a given (bank-level) determinant. At first sight,
the evidence shows the difference in the effect of the country-specific factors on the way in which banks
determine their risk- and non-risk based capital ratio.
We now turn to investigating more precisely the impact of country-level factors on each type of
capital decisions We interpret the effects of country-specific variables on the impacts of bank-level
factors to evaluate whether they are substitutes or complements when both banks- and indirect impacts
are statistically significant.
First, we observe that the negative relationship between size and Tier 1 capital (row 2, Panel A)
is strengthened (row 7, Panel A) in countries subjects to lower bankruptcy costs, as indicated by higher
regulation index (column 1). This suggests that strengthening the regulation serves as a complement
mechanism, and not as a substitute mechanism as hypothesized in IH-1, to increasing bank size for
controlling financial distress. Thus, the evidence from the Tier 1 ratio cannot confirm IH-1 and IH-2.
This finding is interesting and do support the recent reform of Basel 3. Indeed, Basel 3 requires
systemically important banks (SIB) to hold more capital.
In addition, the negative relationship between risk-insensitive capital and collateral (row 1,
Panel B) or growth opportunities (row 4, Panel B) is weaker (row 8 and 11, respectively) in countries
subjects to higher regulation index. In other words, strengthening the regulation acts as substitute
mechanism to increasing the collateral and the growth opportunities for controlling the agency costs.
These findings confirm IH-2.
Second, concerning IH-3, we observe that the positive relationship between profitability and
both types of capital (row 3) is mitigated (row 10) in countries in which there is a less asymmetric
information problem (column 2). Indeed, high profitable banks hold less capital in countries subject to
lower asymmetric information problem, as measured by the degree of monitoring index. In other words,
increasing the monitoring acts as substitute mechanism to increasing profitability for controlling the
asymmetric information problem. These evidence confirms IH-3.
Furthermore, although not hypothesized, we do observe some other indirect impacts of
monitoring index on the bank capital structure. The negative impact of size on non-risk based capital
ratio (row 2, Panel B) is reinforced (row 9, Panel B) in countries subject to less asymmetric information
problem (column 2). In other words, larger banks use less non-risk based capital ratio in countries subject
16

to higher monitoring than banks in other countries. Therefore, being larger is more pronounced in
countries in which outsiders have more possibilities to monitor banks. This finding is interesting since
it shows that minimizing the bankruptcy costs effects become more critical in countries with lower
asymmetric information. We also find the mitigating (strengthening) effect of monitoring on the
relationship between collateral (growth opportunities) and non-risk based capital ratio (row 8 and 11,
Panel B), however, the impacts of collateral and growth opportunities on bank non-risk based capital
ratio are non-significant (row 1 and 4 respectively).
Third, we do not observe any indirect impacts of deposit insurers empowerment on bank nonrisk based capital ratio; however, we do observe several impacts in the case of risk-based capital. The
positive relationship between collateral and risk-based capital ratio (row 1, Panel A) is strengthened
(row 8, Panel A) in countries with greater empowerment of deposit insurers (column 3). Indeed, in these
countries, high collateral banks tend to hold more risk-based capital ratio than those in countries where
deposit insurers are less empowered. Instead of mitigating the effects of bankruptcy costs as
hypothesized in IH-4, the greater empowerment of deposit insurers strengthens these effects. However,
as explained above, holding high collateral assets could be considered an arbitrage strategy of banks
to hold fewer risk-weighted assets (rwa) and higher risk-based capital ratio.
On the other hand, as explained in the above section, since banking firms are highly regulated,
the opportunistic behavior of banks mangers/shareholders is then controlled, reducing the discretion
over the firm projects and debt-related agency costs (Smith Jr. and Watts [1992]). In other words,
banking regulation has indirect effects on bank capital since it reduces agency costs of debts. Therefore,
high growth banks use less capital. This negative relationship (row 4, Panel A) is strengthened (row 11,
Panel A) in countries subject to greater empowerment of deposit insurer (column 3). This finding is
interesting since the role of banking regulation for mitigating the agency problems is more pronounced
in countries subject to lower bankruptcy costs. Thus, high growth banks use less Tier 1 capital in
countries subject to high empowerment of deposit insurers than in other countries.
Fourth, larger banks are subject to lower bankruptcy costs, then can use less capital, explaining
the negative sign between size and bank capital (row 2). In competitive markets, banks with less market
power have lower franchise value (Berger, Klapper, and Turk-Ariss [2009]). Thus, they tend to behavior
incorrectly, leading to higher bankruptcy costs and agency problem. The column (4), panel B, shows the
negative impact between bank non-risk based capital ratio and size (row 2) is strengthened (row 9) in
countries in which banking industry is competitive, i.e. larger banks tend to use less capital in
competitive markets than in other markets. Put it differently, being larger is more pronounced in
competitive market. This suggests that strengthening the market competition serves as a complement
mechanism to increasing bank size for controlling financial distress.
Furthermore, the positive impact between bank non-risk based capital ratio and profitability
(row 3) is weaker (row 10) in countries in which banking industry is competitive, i.e. high profitable
banks tend to use less capital in competitive markets than in other markets. Put it differently, the effects
of increasing profitability for controlling asymmetric information problems is lower in competitive
markets.
Fifth, the negative relationship between growth opportunities and Tier 1 capital ratio (row 4,
Panel A) is strengthened (row 11, Panel A) in better institutional environments (column 5). Similar to
the impacts of the empowerment of deposit insurers explained above, as better legal system lightens the
bankruptcy and agency problems, this finding shows that the legal system and the regulation in banking
system act as complement mechanisms for controlling the agency costs in banking firms. It is at odds
with IH-7. Concerning the non-risk based capital ratio, the negative (positive) relationship between nonrisk based capital ratio and size (risk) (row 2 and 5 respectively) is weaker (row 9 and 12) in countries
subjects to better legal system. These findings confirm IH-6 in which we suggest the substitute
mechanism between legal system and minimizing the costliness of bankruptcy process.
Sixth, the evidence with the Tier 1 capital ratio in column (6) (Panel A) do not confirm IH-8,
and IH-9. We observe by contrast that the positive relationship between bank Tier 1 capital ratio and
profitability (row 3, Panel A) is strengthened (row 10, Panel A) in countries with better economic
conditions. In other words, high profitable banks hold more Tier 1 capital in better economic conditions
than in worsen economic conditions. Possible explanation is that risky banks in better economic
condition countries could be concerned about the adverse effects during periods of busts when risks
materialize, they will then hold more Tier 1 capital during upturns to comply with the required level
17

established by regulation. In contrast, the evidence with the non-risk based capital ratio confirms IH-8
and IH-9. Indeed, the negative relationship between non-risk based capital ratio and size (row 2) or
growth opportunities (row 4) are weaker (row 9, 11 respectively) in countries with better economic
conditions. In other words, larger and high growth opportunities banks tend to hold less non-risk based
capital ratio in upturns periods than in downturns periods. The need to being larger for mitigating the
bankruptcy risk and having lower growth opportunities for reducing the asymmetric information are less
pronounced in countries with better economic conditions.
Overall, bank- and country-level factors acts as substitute and complement mechanism for each
other.
5. Robustness
We conduct a battery of sensitivity tests to examine whether our baseline results are robust to
alternative definitions of capital, alternative sample decompositions and other institutional variables.
5.1. Alternative measures of capital
In this section, we use alternative measures of capital to investigate how banks determine their
capital structure. More precisely, we test for other quality forms of capital. For the Tier 1 capital ratio,
we rerun our estimation with the total capital ratio, while for the non-risk based capital ratio, we test the
sensitivity with the ratio of common equity over total asset. In fact, total capital ratio could be considered
as a lower quality form of Tier 1 capital to compare with the tier 1 ratio. In addition, as we are concerned
about the important proportion of reevaluation in the total equity, the ratio of common equity over total
asset is considered as a pure leverage ratio. The evidence is showed in Table 8.
[Insert Table 8 about here]
For the impacts of bank-level determinants on these two capital ratio, our results are largely
similar. The adjusted R-squared is quite unchanged. For the impacts of country-level determinants
(Equation (3)), we obtain several differences. Regarding the total capital ratio (panel A), in countries
subject to higher monitoring and greater power of deposit insurers, the impact of profitability on the
total capital ratio is mitigated, while the impact of risk is strengthened in countries with better legal
environment. Concerning the ratio of common equity over total asset (panel B), in countries subject to
strict regulation of capital, the role of bankruptcy costs and liquidity creation on bank capital is
mitigated, while the impact of growth opportunities on bank capital is tightened in countries subject to
highly concentrated markets.
5.4. Alternative sample compositions
Since our sample contains a disproportionate part of US banks, we are concerned about the
sample composition biases. We therefore repeat our analysis using an alternative sample after excluding
the US banks. Table 9 reports the results. We do not report results of monitoring index, deposit insurer
power since we do not have enough observations. For the impacts of bank-level determinants, we do not
observe any change, however we do with the impacts of institutional characteristics. Concerning the
direct impacts, in countries subject to high concentration markets, banks hold more Tier 1 capital. For
the indirect impacts, we observe several changes under the impacts of the legal system in the case of
Tier 1 capital. In countries with better institutional environment, the impacts of the profitability and risk
on bank Tier 1 capital structure are strengthened whereas the impacts of size are mitigated.
[Insert Table 9 about here]
We next repeat our investigation by dividing our sample into two sub-sample: emerging and
developed countries. Table 10 reports the results. We draw several remarks. We observe that firm-level
determinants coefficients generally are higher in developed countries than in emerging countries. The
difference impacts experienced in country-specific characteristics confirm the heterogeneity in
institutional environment between emerging and developed countries.

18

[Insert Table 10 about here]


5.3. Does banks financing behavior change after the financial crises?
Our period studied lasts for 10 years, from 2004 to 2013, during which the financial crisis
happens. Many researches demonstrate the weakness of the regulation and supervision is one of the
reasons leading to this turmoil, so that there are many regulations reforms after crisis. We investigate
how banks in our sample change their behavior in determining capital structure after the last financial
crisis. Since regulators around the world implement many macro-prudential reforms in the aftermath of
this crisis to achieve a more resistant financial system, the bank behavior after crisis in determining their
capital structure could send a signal on the effectiveness of regulatory reforms. We rerun our estimation
as below:
= + + + + + + +

(4)

As before, the dependent variables are the tier 1 ratio and the equity/asset ratio of bank i in
country j in year t. We introduce in the equation (4) the dummy variable Post (Post crisis) which is equal
to 1 for the period 2010-2013.
[Insert Table 11 about here]
The results are reported in Table 11. Panel A shows the results using the Tier 1 capital ratio, and
panel B shows the results with the non-risk based capital ratio. In general, we observe that during the
post crisis period, banks tend to hold more Tier 1 capital than (they did in) previous period.
5.4. Does national culture affect the banks choice of capital structure?
In his institutional model, Williamson (2000) provides an extensive and comprehensive
framework of social analysis by distinguishing it into four levels: (i) Level I includes informal
institutions such as norms, customs, religion, codes of conduct and culture; (ii) Level II: formal
institutional environment such as constitutions, law, property rights; (iii) Level III: corporate governance
structures; and (iv) Level IV: actual firm practices. Culture is embedded in the highest level (I) and
impacts institutions that again affect lower levels. This arguments suggests that culture affects firms
financing decisions, and a growing body of literature in business studies proves it (Aggarwal [1981],
Chui, Lloyd, and Kwok [2002], Kwok and Tadesse [2006], Chui and Kwok [2007], Chui and Kwok
[2009], Aggarwal and Goodell [2009], Chui, Titman, and Wei [2010] international, Shao, Kwok, and
Guedhami [2010], Zheng et al. [2012]).
In this section, we introduce national culture as a potential explanation to what extent the banks
financing decisions are different across-country. Following the literature, we opt for the four cultural
dimensions of Hofstede and Hofstede (2001): (i) individualism versus collectivism, which is related to
the integration of individuals into primary groups; (ii) power distance index, which refers to solutions
to basic problems of human inequality; (iii) uncertainty avoidance, which is related to the level of stress
in a society in the face of an unknown future; (iv) masculinity versus femininity, refers to the distribution
of roles between the genders.
We posit that these cultural dimensions influences banks financing choice through the
perception of agency cost, asymmetric information and bankruptcy risk. Specifically, in high uncertainty
avoidance countries, people are less tolerant towards uncertainty and ambiguity, and a variety of
opinions. Thus, these societies are harder to accept changes and take less risks. For the second culture
dimension - power distance, this index indicates the dependence relationships in a society. It is referred
to the extent that society deals with human inequality. Newman and Nollen (1996) document that the
asymmetric nature of performance reward and penalty is widespread in the masculine culture; the
positive rewards are much bigger when the outcome is positive than the penalties the managers have to
pay when the outcomes have gone bad. Therefore, in those societies, managers prefer to have more
flexibility to jump in when good opportunities arise. We thus suggest that in those countries with high
uncertainty avoidance, high power distance, and masculine culture, managers tend to be more riskaverse and behave correctly. Furthermore, there is less asymmetric information problem in those
societies. In the other hand, individualist society is referred to I-consciousness, meaning that
19

individuals consider the self (themselves??) as more important in decision making than the group, and
prefer autonomy and challenging the self. They are reluctant to contribute to collective action, and less
willing to cooperate with other partners outside their firms. Therefore, we suggest that in those societies
subject to individualist culture, there exists asymmetric information problem. And managers have
incentives to increase their risk-taking behavior due to their overconfidence and optimism.
[Insert Table 12 about here]
We observe that there is no direct impact of national culture on bank financing decisions, but
indirect impacts. These cultural dimensions generally have mitigated impacts on the relationship
between bank-level characteristics and bank capital structure. Specifically, in countries subject to high
power distance, to masculine culture and to high uncertainty avoidance, high growth opportunities banks
tend hold more capital than in other countries. High profitable banks are less capitalized in societies
with high power distance and uncertainty avoidance, individualist and masculine culture than in other
societies. Furthermore, risky banks hold less capital in countries subject to individualist and masculine
culture.
6. Conclusion
The financial crisis has initiated a great amount of research concerning bank capital. One of the
major concerns is how banks determine their capital and this is still an open question. The main objective
of this study is to investigate the bank behavior in determining their capital ratio. To this end, we analyze
the determinants of capital structure of the 569 largest and publicly traded banks in 26 developed and
emerging countries over the period 2004-2013. To optimize our investigation, we distinguish between
two types of bank capital ratio: the Tier 1 capital ratio with a specified minimum threshold for
compliance, and the non-risk based capital ratio ratio, determined in the same way as in corporate
finance.
We first begin with the impact of bank-level factors that are taken from the literature on
corporate finance and banking. Using the 2SLS approach, we perform simultaneously country-bycountry and pooled regressions. We observe that banks decide their non-risk based capital ratio structure
in much the same way as non-financial firms, except for growth opportunities. The risk-based capital
decisions experience in turns more than half similarities (3 over 5 variables) as in corporate finance,
except for collateral and growth opportunities. We also assess which bank-level factors are reliably
important in explaining the decision of banks capital structure. The evidence suggests that size and
profitability are the dominant factors for both the risk- and non- risk based capital ratio. We also find
that collateral and growth opportunities are reliable factors in explaining how banks determine their riskbased capital ratio, whereas liquidity creation is important for the non-risk based capital ratio ratio. This
finding is important since it confirms the theories of Calomiris and Kahn (1991), Diamond and Rajan
(2000), (2001) on the fragility of bank capital structure to perform their liquidity creation function under
a framework of non-binding capital regulation.
Using separate country-by-country regressions, we find systematic differences in the capital
decisions across-countries. We explain these observed cross-country differences by investigating the
impact of the institutional environment and the traditions in which banks operate. We suggest that
country-level factors, such as the legal system, bank-specific factors and economic conditions influence
banks capital decisions through their impacts on bankruptcy costs, agency costs, asymmetric
information and liquidity creation. We distinguish between two types of effects: the direct impacts of
country-level factors on bank capital decisions and the indirect impacts through their influences on banklevel factors.
Investigating the direct effects of country-level factors on capital decision, we do not observe
any effects of country-level factors on the risk-based capital ratio of banks. However, we find several
effects in the case of the non-risk based capital ratio ratio. In particular, in countries with a high degree
of concentration and stringent monitoring, banks tend to hold more equity, whereas banks use less equity
in countries with better economic conditions.
In analyzing the indirect effects, we find different impacts of country-specific variables on both
types of capital decisions. For the risk-based capital ratio, the evidence suggests that in countries subjects
20

to stringent regulation, the impacts of bankruptcy costs on capital are strengthened. In countries subject
to higher monitoring, the impacts of agency costs on capital are mitigated, whereas they are strengthened
in countries subject to better legal system and higher empowerment of deposit insurers. The effects of
asymmetric information on capital are weaker in countries subject to higher monitoring and to markets
with higher concentration, whereas they are strengthened in countries with better economic conditions.
We also observe banks that create more liquidity will hold more Tier 1 capital in countries subject to
better legal systems and higher monitoring than in other countries. On the other hand, for the non-risk
based capital ratio, in countries subject to higher monitoring and higher concentrated markets, the
impacts of bankruptcy costs on non-risk based capital ratio are strengthened, whereas they are moderated
in countries subjects to better legal system and better economic conditions. In countries subject to higher
monitoring, the effects of agency costs on bank capital are reinforced while they are mitigated in
countries subjects to higher regulation, higher concentrated markets and better economic conditions.
The effects of asymmetric information on bank capital are weaker in countries in which monitoring is
effective and markets are concentrated. Finally, banks that create liquidity hold more capital in countries
subjects to better legal system than in other countries.
The robustness testing confirms the impacts of bank- and country-level determinants on banks
financing choices. Overall, besides the traditional firm-level determinants, which have nearly the same
impacts on risk- and non-risk based capital ratio decisions for banks, the evidence highlights the
importance of the effect of country-specific factors on bank capital decisions when we observe different
findings depending on the type of capital. A banks capital structure reflects the institutional
environment in which it operates.

21

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25

Appendix 1
Description of variables, and sources
This table shows the bank-level determinants of banks capital structure. We follow Gropp and Heider (2010) in the definition of variables
taken from corporate finance. Liquidity creation is measured as in Berger and Bouwman (2009).
Variables
Descriptions
Sources
Panel A: Dependent variables
Tier 1 ratio
T1r
Tier 1 capital divided by risk-adjusted assets
Bankscope
Total capital ratio

Tcr

Equity to assets ratio


E2ar
Common equity to assets
Ce2ar
ratio
Panel B: Bank-level variables
Growth opportunities
Mtb
Profitability
Roa
Size
Size
Collateral

Coll

Risk
Risk
Liquidity creation
Ltg
Panel C: Country-level variables
Regulation

Reg

Monitoring

Mon

Deposit

Dep

Competition

Comp

Legal system

Leg

Tier 1 capital plus Tier 2 capital (subordinated debt, loan loss


reserves, and valuation reserves) divided by risk-adjusted assets

Bankscope

Total equities divided by total assets

Bankscope

Common equities divided by total assets

Bankscope

Market equity value / Book equity value


Return on assets
Ln (Total assets)
[Total Securities + Government Securities + Cash and Due From Banks + Fixed
assets] / Book asset value
Impaired loans / Gross loans
[Liquid liabilities Liquid assets] / Total assets

Thomson One
Bankscope
Bankscope

First principal components of: (i) the capital regulation index (capreg); (ii) prompt
corrective power (prompt). Factor loadings are 0.70 for both indices.
First principal components of : (i) independence of supervisory authority (indep); (ii)
the private monitoring index (pmi); (iii) the external governance index (egovern).
Factor loadings are 0.62, 0.62, and -0.47 for indep, pmi, and egovern respectively.
First principal components from two proxies taken from Barth, Caprio, and Levine
(2013): (i) deposit insurer power (dip; (ii) the moral hazard index. Factor loadings are
0.70 for both indices.
Measures the degree of competition in the banking system in country j; See Appendix
2

Barth et al.
(2013)

First principal components from three proxies: (i) the type of law (law); (ii) creditor
right protection (cred_right); (iii) shareholder right (share_right). Factor loadings are
0.69, 0.20, and 0.69 for law, cred_right and share_right respectively.

GDP
Measures the growth rate of a given economy
Panel D: Variables for robustness tests
Power distance
Pdi
Power Distance represents inequality (more versus less)
Cultural dimension associated with how individuals are integrated into groups; a high
Individualism/Collectivism Ind
score indicates that the society puts a high emphasis on individual accomplishments.
Masculinity/Femininity
Mas
Masculinity versus Femininity
Cultural dimension related to the level of stress in a society while confronted with
Uncertainty avoidance
Uai
unknown future; a high score indicates that the country is less tolerant of uncertainty

Bankscope
Bankscope
Bankscope

Barth et al.
(2013)
Barth et al.
(2013)
Bankscope
La Porta et
al.(1997);
Djankov et al.
(2007)
WBI
Hofstede (2001)
Hofstede (2001)
Hofstede (2001)
Hofstede (2001)

Appendix 2
The Panzar and Rosse (1987)s H-Statistic
Following Claessens and Laeven (2004), we adopt the following reduced-form revenue equations for each country:
( ) = + 1 (1, ) + 2 (2, ) + 3 (3, ) + 1 (1, ) + 2 (2, ) + 3 (3, ) + +
Where is the ratio of gross interest revenue to total assets (proxy for output price of loans), 1, is the ratio of interest expenses to total
deposits and money market funding (proxy for input price of deposits), 2, is the ratio of personnel expense to total assets (proxy for input
price of labor), and 1, is the ratio of other operating and administrative expense to total assets (proxy for input price of equipment/fixed
capital). The subscript i denotes bank i, and the subscript t denotes year t. This model is similar to models used previously in the literature to
estimate H-statistics for banking industries (Mamatzakis, Staikouras, and Koutsomanoli-Fillipaki [2005], Yeyati and Micco [2007], Liu,
Molyneux, and Nguyen [2012], Schaeck and Cihak [2012]).
We include several control variables at the individual bank level. Specifically, 1, is the ratio of equity to total assets, 1, is the ratio of net
loans to total assets, and 1, is the logarithm of total assets (to control for potential size effects). D is a vector of year dummies for the years
1995 through 2001 (we drop the year dummy for the year 2004). We take natural logarithms of all variables. We estimate model (1) both using
OLS with time dummies. The H-statistic equals 1 + 2 + 3 .
0:
{ 0 < < 1:
= 1:

26

Percent

2
0

Percent

Figure 1 Distribution of bank capital ratio


The figure shows the distribution of the Tier 1 ratio (risk-based capital ratio) and the equity to asset ratio (non-risk based capital ratio ratio) for
4840 bank-year observations in our sample of 569 largest, publicly traded banks from 2004-2013.

10

15
20
Tier 1 Ratio

25

30

10

20

30

Equity / Tot Assets

27

Table 1 Descriptive statistics


The table shows descriptive statistics by country (Panel A), by size (Panel B), by region (Panel C) and for full sample (panel D). The reported values are means of the respectives variables. Large banks with total assets
exceeding $3 billion, medium banks with total assets of $13 billion, and small banks with total assets up to $1 billion. The classification between developed and emerging countries is based on World Bank data. All
variables are defined in Appendix 1.
Country
T1r
E2ar
Colla
Size
Profit
Gr.Opp Risk
Liq.Cre CapReg Prompt Indep Pmi
Egovern Depo Mhi
Comp Law
CredRi ShareRi Gdp
Panel A: Summary statistics by country
Australia
9.037
6.668
Austria
11.871 10.678
Brazil
13.656 11.705
Bulgaria
12.955 13.313
Canada
11.511 7.502
Chile
12.333 9.688
China
10.550 7.429
Columbia
10.315 6.171
Denmark
12.623 9.234
Egypt
12.690 8.251
France
12.640 9.371
Greece
11.153 6.999
India
10.200 7.035
Indonesia
12.026 9.056
Italy
9.868
8.337
Japan
9.780
6.820
Korea
11.495 8.533
Malaysia
11.474 9.187
Philippines
14.724 11.204
Poland
12.986 8.417
Russian
12.305 8.732
Spain
14.409 12.503
Switzerland
14.113 8.922
Thailand
13.803 10.407
US
12.555 9.684
United Kingdom 9.539
6.027

27.648
32.098
41.660
21.352
52.209
43.616
47.104
45.751
47.228
51.362
61.754
28.323
55.405
44.793
42.335
47.021
51.099
32.449
41.245
47.576
46.952
66.883
50.914
39.032
40.986
50.791

Panel B: Summary statistics by size


Large
11.151 7.925
44.181
Medium
13.602 10.236 40.103
Small
14.793 11.984 34.958
Panel C: Summary statistics by region
Developed
11.938 8.505
42.427
Emerging
12.017 9.471
43.248
Panel D: Summary statistics for full sample
Mean
11.678 8.697
44.511
N
5528
6232
3688
sd
4.474
4.283
21.667
p25
8.620
5.665
27.973
p50
10.980 7.999
41.045
p75
13.535 10.587 57.648

18.580
15.988
15.870
15.111
15.965
15.929
16.474
17.629
15.627
15.619
18.774
17.112
16.372
15.519
17.760
16.704
16.025
16.127
15.630
15.397
15.980
16.028
16.183
16.043
15.408
16.297

0.173
0.681
1.537
1.046
0.695
1.075
0.737
0.447
0.670
0.492
1.039
-0.385
0.695
0.933
0.756
0.449
0.943
0.950
1.243
0.904
0.786
1.165
1.148
1.338
0.825
0.567

1.711
1.167
1.259
1.418
1.771
2.009
1.806
1.715
1.049
1.505
0.958
1.761
1.459
3.008
1.388
0.885
0.711
1.435
1.316
1.783
1.134
1.309
1.893
1.388
1.455
1.494

5.888
2.439
5.665
7.689
3.886
2.432
5.305
5.535
4.928
7.303
4.204
7.866
4.476
4.253
4.007
4.457
2.394
3.898
5.057
5.141
5.858
5.073
2.560
6.712
3.106
3.376

67.365
77.633
55.408
66.086
67.808
69.871
75.324
63.287
59.749
85.284
44.875
86.740
77.348
68.796
67.142
79.205
77.453
65.333
73.447
74.865
67.593
53.160
64.637
74.476
78.835
81.359

8.000
4.000
5.000
8.300
4.600
6.000
6.000
.
5.200
6.500
8.000
5.800
9.000
8.857
5.500
5.000
.
4.100
8.000
8.000
.
8.000
7.000
9.000
7.429
5.800

3.800
3.500
1.500
1.200
1.500
3.600
2.571
3.800
3.500
6.000
0.000
1.800
1.200
6.000
1.500
6.000
4.000
2.000
3.300
1.200
3.300
2.200
2.400
1.800
5.000
0.000

2.700
2.600
1.700
3.000
2.700
0.000
1.000
0.300
1.700
1.300
2.429
1.600
2.600
2.429
1.100
2.000
0.500
3.000
1.000
1.400
1.300
1.900
2.000
2.000
1.700
1.000

9.373
9.383
8.353
10.300
9.228
8.800
9.507
8.280
9.530
9.468
9.740
9.432
9.140
8.813
8.817
9.267
9.500
9.556
9.381
9.102
9.538
8.233
9.515
9.068
9.458
9.192

14.000
15.429
15.700
15.000
.
15.100
.
14.571
15.000
16.700
15.000
14.000
16.000
16.429
15.429
14.429
16.800
15.800
14.000
15.000
.
16.143
15.000
16.429
16.200
15.143

0.700
2.000
0.000
0.000
4.000
1.300
.
0.000
0.700
.
2.267
1.000
2.000
2.900
0.600
1.333
1.700
2.500
3.400
0.000
1.500
2.000
1.500
0.300
4.000
1.100

0.000
1.000
1.000
1.000
2.300
1.000
.
.
1.000
.
2.300
1.300
0.300
0.571
2.000
1.100
.
1.571
1.100
1.700
.
1.000
1.000
0.500
1.700
1.700

0.018
0.030
-0.036
0.389
-0.002
0.176
0.003
0.057
0.004
-0.310
0.003
0.181
-0.008
0.005
-0.003
0.011
0.018
0.011
-0.016
0.015
-0.009
0.017
0.013
0.025
0.022
0.001

1
0
0
0
1
0
0
0
0
0
0
0
1
0
0
0
0
1
0
0
0
0
0
1
1
1

1.429
1.600
1.600
1.750
1.636
0.875
1.263
1.600
1.708
1.800
1.800
1.750
1.611
1.586
1.538
1.500
1.000
1.875
1.727
1.700
2.050
1.667
1.500
2.000
1.728
1.625

4
2
3
.
4
3
0
1
3
2
2
1
2
2
0
3
2
3
4
.
.
2
1
3
5
4

3.008
1.563
3.755
3.083
1.903
4.448
10.215
4.812
0.553
4.556
1.105
-1.384
7.530
5.797
-0.241
0.855
3.844
5.031
5.391
4.052
4.119
0.845
2.197
3.856
1.718
1.216

17.238
14.340
13.253

0.711
0.789
1.004

1.412
1.418
1.563

3.859
4.029
4.244

71.797
77.813
72.592

6.546
7.022
6.458

3.883
4.298
4.077

1.816
1.794
1.665

9.272
9.540
9.568

15.624
16.054
15.687

2.367
2.933
2.722

1.292
1.483
1.383

0.016
0.011
0.006

0.468
0.610
0.524

1.634
1.672
1.702

3.243
3.927
3.846

2.829
2.632
2.581

16.267
16.211

0.645
0.999

1.384
1.534

3.475
4.878

74.615
70.101

6.553
6.789

4.173
3.530

1.809
1.770

9.424
9.188

15.696
15.717

2.661
2.122

1.394
1.179

0.021
-0.001

0.545
0.389

1.652
1.636

3.659
2.834

2.306
3.786

16.008
6232
2.132
14.305
15.923
17.302

0.760
6217
1.116
0.253
0.780
1.244

1.428
4831
1.122
0.770
1.180
1.750

4.125
5558
4.819
1.024
2.778
5.263

74.263
5432
19.323
65.508
78.948
86.863

6.619
3495
1.694
5.000
7.000
8.000

3.968
5336
2.243
3.000
5.000
6.000

1.797
4803
0.698
1.000
2.000
2.000

9.291
5170
1.279
9.000
10.000
10.000

15.702
4206
1.273
15.000
16.000
16.000

2.494
5142
1.505
1.333
3.000
4.000

1.333
4914
0.729
1.000
1.000
2.000

0.014
8535
0.159
0.001
0.001
0.051

0.496
8535
0.500
0.000
0.000
1.000

1.643
8520
0.737
1.000
2.000
2.000

3.407
8025
1.503
2.000
3.000
5.000

2.774
5690
3.291
1.602
2.437
4.629

28

Table 2 Hypotheses
The table summarizes the hypotheses for bank- and country-specific effects
Banks-specific effects hypotheses
BH-1
Bank size has a negative effect on the bank capital ratio
BH-2
Collateral has a negative effect on the bank capital ratio
BH-3
Risk has a positive effect on the bank capital ratio
BH-4
Growth opportunities have a positive effect on the bank capital ratio
BH-5
Profitability has positive effects on bank capital ratio
BH-6
Liquidity creation has positive effects on bank capital ratio
Direct country-specific impacts
DH-1
Better regulatory framework (better regulation, more effective monitoring and high power of deposit insurers) has a positive effect
on bank capital.
DH-2
A better legal system has a positive impact on bank capital.
DH-3
Economic growth has a positive impact on bank capital.
Indirect country-specific impacts
IH-1
The stringency of capital regulation mitigates the effect of bankruptcy risk (size, collateral, risk) on bank capital structure.
IH-2
The stringency of capital regulation mitigates the effect of agency problems (growth opportunities, collateral) on bank capital
structure.
IH-3
A better monitoring mitigates the impacts of asymmetric information (profitability, growth opportunities) on bank capital structure.
IH-4
Greater empowerment of deposit insurers mitigates the effects of bankruptcy risks (profitability, size, collateral, risk)
IH-5
Higher market concentration strengthens the impact of liquidity creation on bank capital.
IH-6
The legal system mitigates the effects of bankruptcy risk (size, collateral, risk) on bank capital structure.
IH-7
The legal system mitigates the effects of agency costs determinants (growth opportunities, collateral) on bank capital structure.
IH-8
Better economic conditions reduce the effect of bankruptcy risks (size, collateral, risk) on bank capital structure.
IH-9
Better economic conditions reduce the effect of asymmetric information (profitability, growth opportunities) on bank capital
structure.

29

Table 3 Impact of bank-level variables on Tier1 capital across countries


This table depicts the results from the regression of the equation (10) where we use the country-by-country regression Kijt=0j+kjXit+i
(eq.10) (Separated method), and the equation (11) Kit=0j+jXit+i (eq.11) (Pooled method) using 2SLS method; with Kijt, the risk-based
capital ratio of bank i in country j at time t; Xit, the vector of 6 bank-level factors which are the growth opportunities (mtb), the profitability
(roa), the size (size), the collateral (collr), the risk (risk) and the liquidity creation (ltg); it i.i.d. (0, 2i ) 2i = 2 I; Cov (it ; ls) = 0 and i =
l. We use the lag of independent variables as IV. Standard errors in parentheses.
#
1

Country
Australia

Austria

Brazil

Bulgaria

Canada

Chile

China

Columbia

Denmark

10

France

11

Greece

12

India

13

Indonesia

14

Italy

15

Japan

16

Malaysia

17

Philippines

18

Poland

19

Korea

20

Russian

21

Spain

22

Switzerland

23

Thailand

24

US

25

Uni. Kingdom

26

All sample

Collr
0.1019*
(0.0615)
-0.0618
(0.0921)
0.0951**
(0.0419)
0.1471***
(0.0525)
0.0858
(0.1088)
0.0797***
(0.0195)
0.0317
(0.0622)
0.0785**
(0.0373)
0.0777***
(0.0217)
0.0634**
(0.0282)
-0.0417
(0.1005)
0.0146
(0.0155)
0.0772***
(0.0099)
0.1629***
(0.0265)
0.0632***
(0.0134)
0.0433
(0.0492)
-0.1044
(0.1114)
0.1108***
(0.0314)
-0.133***
(0.0452)
0.2180***
(0.0472)
-0.0015
(0.0261)
-0.0463
(0.0602)
0.0960***
(0.0353)
0.0630***
(0.0099)
-0.0402
(0.0856)
0.0516***
(0.0091)

Size
-0.6063
(0.5003)
-0.2691
(0.3575)
-0.7435
(0.4527)
-0.8118
(2.1224)
-1.3605
(1.1478)
-0.9333***
(0.2882)
-0.5472**
(0.2757)
-1.8088***
(0.3384)
-0.7034**
(0.3115)
2.9769***
(0.9567)
-0.2977
(0.5195)
-0.3089**
(0.1359)
-0.3330**
(0.1503)
-0.4306
(0.3467)
-0.5926***
(0.1012)
-1.2454***
(0.3045)
-0.0267
(0.5066)
-0.5913***
(0.1860)
2.1724***
(0.3083)
-0.8303
(0.5354)
-1.4380***
(0.2557)
-0.8341
(0.5829)
-2.7287***
(0.2982)
-0.6251***
(0.0778)
0.6287
(0.6857)
-0.7322***
(0.0630)

Roa
1.0973
(1.1694)
-0.9921*
(0.5753)
0.7581
(1.2668)
0.2614
(0.2407)
0.4748
(2.4993)
2.8222**
(1.2327)
1.9901
(2.6813)
3.0403***
(0.7286)
0.1476
(1.1608)
-1.6741
(1.2984)
-1.1548
(1.1146)
1.4869**
(0.6330)
0.5829*
(0.3446)
-1.8226*
(0.9727)
1.4685***
(0.3151)
0.9428**
(0.4730)
3.0986***
(0.9626)
1.3165*
(0.6752)
2.7249**
(1.2012)
-0.4378
(1.2663)
2.7407***
(0.9104)
-2.7742
(1.7823)
1.3425**
(0.5709)
1.1661***
(0.3046)
4.8220
(3.4104)
0.8820***
(0.2052)

Mtb
-1.4283**
(0.6530)
-3.3426**
(1.5503)
-1.0087
(1.0544)
-0.7322
(0.9392)
4.5936
(3.4688)
1.8206***
(0.6735)
0.0114
(0.7953)
-2.8188**
(1.4155)
-0.4691
(0.6946)
-2.8695***
(0.6844)
-1.0948***
(0.3371)
0.4583*
(0.2477)
-0.1788*
(0.1002)
-1.5390***
(0.4203)
-1.5345***
(0.4358)
0.2860
(0.7880)
1.7270
(1.7754)
-1.6360***
(0.6158)
-1.9280**
(0.8093)
-1.9934**
(0.9587)
3.9298***
(1.3561)
-1.2975***
(0.4228)
0.4172
(0.7616)
-1.0691***
(0.2798)
-2.4636
(1.6460)
-0.5041***
(0.1127)

Risk
0.0595
(0.2544)
-0.1388**
(0.0696)
-0.2439
(0.2178)
0.1727
(0.3210)
1.0333**
(0.4830)
0.7943**
(0.3109)
0.0271
(0.5411)
0.4692
(0.2858)
0.0458
(0.1009)
0.4390***
(0.1301)
-0.1973
(0.1624)
0.2239***
(0.0498)
0.0381
(0.0584)
-0.0952
(0.1724)
-0.1803*
(0.0957)
-0.2554
(0.2026)
0.3504
(0.2405)
-0.0194
(0.1505)
1.0807*
(0.6226)
-0.0855
(0.1926)
0.4980***
(0.1713)
-0.8689**
(0.3984)
0.1291
(0.1232)
0.1375**
(0.0554)
2.0301*
(1.0552)
0.0862**
(0.0359)

Ltg
0.0132
(0.0575)
-0.0100
(0.0383)
-0.0577*
(0.0316)
-0.1217***
(0.0300)
-0.0359
(0.0788)
0.0011
(0.0220)
-0.0341
(0.1055)
-0.2812***
(0.0659)
-0.0756***
(0.0281)
-0.0107
(0.0295)
-0.0365
(0.0549)
-0.1019***
(0.0216)
0.0239
(0.0191)
0.1002**
(0.0396)
-0.0872***
(0.0135)
-0.0504*
(0.0278)
-0.1229*
(0.0722)
0.0493
(0.0419)
-0.0910
(0.0858)
-0.1390***
(0.0316)
0.0083
(0.0282)
-0.1318**
(0.0546)
-0.0077
(0.0268)
-0.0263
(0.0176)
-0.0268
(0.0812)
-0.0516***
(0.0145)

Constant
19.5904*
(10.9847)
23.4034***
(6.9103)
24.8510***
(8.6971)
28.2357
(38.9882)
21.2224
(22.2292)
14.9393**
(6.0887)
19.2194
(12.6750)
59.8782***
(11.6698)
26.0047***
(6.6717)
-55.0599***
(19.6416)
24.4451***
(8.9253)
20.5522***
(3.6374)
12.9524***
(3.4584)
9.1967
(8.9036)
25.8641***
(2.8168)
33.2064***
(6.2597)
19.3431*
(10.4973)
15.0011***
(5.0918)
-13.6534**
(5.4674)
29.1161**
(13.9062)
29.2360***
(3.9341)
44.8649***
(11.5532)
53.1035***
(6.5186)
22.5878***
(2.4163)
-1.6910
(14.3073)
25.6731***
(1.5926)

N
40

R2 Adj
0.123

J stat (p-val)
10.57 (0.227)

27

0.030

9.058 (0.337)

68

0.444

15.30 (0.053)

16

0.865

4.177 (0.350)

31

0.380

13.11 (0.914)

36

0.709

12.01 (0.000)

47

0.435

8.043 (0.001)

21

0.814

5.957 (0.317)

65

0.214

7.958 (0.438)

16

0.789

9.573 (0.000)

16

0.05

6.726 (0.513)

173

0.324

19.16 (0.014)

99

0.414

2.994 (0.935)

62

0.160

3.175 (0.044)

259

0.282

16.28 (0.000)

34

0.408

10.88 (0.690)

42

0.661

9.772 (0.281)

29

0.575

5.028 (0.116)

16

0.848

10.13 (0.000)

31

0.742

4.828 (0.681)

21

0.891

11.04 (0.345)

39

0.386

11.30 (0.341)

39

0.889

9.073 (0.336)

764

0.194

44.70 (0.000)

22

0.017

9.441 (0.773)

2,134

0.300

12.47 (0.131)

30

Table 4 Impact of bank-level variables on equity to assets ratio across countries


This table depicts the results of the regression from equation (10) in which we use the country-by-country regressions Kijt=0j+kjXit+i
(separation method), and equation (11) Kit=0j+jXit+i (pooled method), with Kijt denoting the non-risk based capital ratio of bank i in country
j at time t, and Xit as the vector of 6 bank-level factors, namely growth opportunities (mtb), profitability (roa), size (size), collateral (collr), risk
(risk), and liquidity creation (ltg);it i.i.d. (0, 2i ) 2i = 2 I; Cov (it ; ls) = 0; i = l. We use the lag of independent variables as IV. Standard
errors are given in parentheses.
#
1

Country
Australia

Austria

Brazil

Bulgaria

Canada

Chile

China

Columbia

Denmark

10

Egypt

11

France

12

Greece

13

India

14

Indonesia

15

Italy

16

Japan

17

Malaysia

18

Philippines

19

Poland

20

Korea

21

Russian

22

Spain

23

Switzerland

24

Thailand

25

US

26

United Kingdom

27

All sample

Collr
0.0792
(0.0527)
-0.0826
(0.0680)
-0.0106
(0.0241)
0.1585
(0.1243)
0.0038
(0.0538)
0.0577***
(0.0148)
0.0383
(0.0529)
-0.0214**
(0.0105)
0.0420*
(0.0253)
-0.0768
(0.0672)
0.0787***
(0.0217)
0.0714
(0.0809)
-0.0206**
(0.0103)
0.0272**
(0.0119)
0.0148
(0.0241)
-0.0246**
(0.0107)
0.0263
(0.0482)
0.0870
(0.0935)
0.0245
(0.0309)
-0.1635***
(0.0391)
0.0110
(0.0219)
0.0127
(0.0245)
-0.0854**
(0.0367)
-0.0187
(0.0250)
-0.0157**
(0.0072)
-0.1802***
(0.0671)
-0.0218***
(0.0068)

Size
-1.0893***
(0.4174)
1.2962***
(0.2900)
-0.1985
(0.2567)
4.7429
(4.9436)
-1.0619**
(0.5121)
-1.1596***
(0.2279)
-0.7185***
(0.2668)
-0.6700***
(0.0819)
-0.7719***
(0.2429)
4.6885***
(1.1832)
-0.2394
(0.1696)
0.3802
(0.3403)
-0.2464**
(0.1053)
-0.8028***
(0.1151)
-0.3289
(0.3472)
-0.7505***
(0.0783)
-1.1019***
(0.2926)
-1.5709***
(0.3478)
-0.3041
(0.2310)
0.4576
(0.3748)
-0.5845***
(0.2132)
-2.1470***
(0.2489)
-0.9286***
(0.3162)
-3.1246***
(0.2534)
-0.4393***
(0.0670)
0.5455
(0.5388)
-0.7563***
(0.0705)

Roa
1.6939
(1.0637)
-0.4204
(0.4949)
1.3773**
(0.5719)
0.3318
(0.4603)
1.0668
(1.3623)
6.0818***
(1.0981)
2.1504
(2.3437)
1.5381***
(0.2303)
-0.1582
(1.0181)
6.6413***
(1.1393)
0.8831
(0.6180)
-0.3059
(0.5933)
1.4392**
(0.5957)
0.6703*
(0.3916)
1.4239*
(0.8516)
2.3577***
(0.2801)
0.8753
(0.5884)
2.4729***
(0.7051)
2.8355***
(0.6399)
3.4849***
(1.0246)
2.1348***
(0.6684)
0.8710
(0.5702)
-1.0962
(1.2476)
0.9878**
(0.4557)
1.5376***
(0.2528)
5.7641***
(2.0318)
1.7767***
(0.1760)

Mtb
-3.1917***
(0.6589)
-2.5476*
(1.3344)
0.0590
(0.9697)
2.6870
(2.0806)
2.9227*
(1.5358)
0.3285
(0.5492)
0.1648
(0.7905)
-0.9115***
(0.2473)
-0.0784
(0.6217)
-0.2565
(0.2468)
-1.6875***
(0.3324)
-0.2192
(0.2530)
0.8327***
(0.2319)
-0.0238
(0.0655)
-1.0429***
(0.3918)
-0.2726
(0.3803)
0.7414
(0.6042)
0.0081
(1.2180)
-1.0351
(0.7789)
-1.6816
(1.0848)
-0.5855
(0.5226)
2.5869**
(1.0375)
-0.8549***
(0.2971)
1.0093
(0.7155)
-0.4953**
(0.2016)
-1.4289
(0.8753)
-0.2508**
(0.1020)

Risk
0.0775
(0.2392)
-0.1851***
(0.0609)
0.0297
(0.1597)
1.1384
(0.7169)
0.5652**
(0.2353)
0.8975***
(0.3405)
0.1301
(0.4904)
0.0897
(0.0801)
0.0102
(0.0934)
0.7829***
(0.1401)
0.0186
(0.0759)
-0.1360
(0.0944)
0.2023***
(0.0403)
0.1389***
(0.0496)
0.2393*
(0.1281)
0.2255***
(0.0814)
-0.1630
(0.2111)
-0.1185
(0.1088)
0.0883
(0.1038)
1.4412***
(0.4981)
0.2069*
(0.1183)
0.5986***
(0.1497)
-0.4515***
(0.1245)
0.1495
(0.1249)
0.0722
(0.0492)
0.3673
(0.8701)
0.1744***
(0.0505)

Ltg
0.0585
(0.0503)
-0.0529**
(0.0259)
-0.0792***
(0.0236)
-0.0707
(0.0691)
-0.0336
(0.0382)
-0.0203
(0.0220)
-0.1083
(0.0870)
-0.1142***
(0.0146)
-0.0353
(0.0271)
-0.3465***
(0.0415)
0.0478***
(0.0101)
-0.1226***
(0.0423)
-0.0911***
(0.0167)
-0.0266
(0.0169)
0.0652**
(0.0325)
-0.1042***
(0.0144)
-0.0957***
(0.0306)
-0.0790*
(0.0466)
0.1959**
(0.0963)
-0.1273
(0.0909)
-0.0305**
(0.0151)
-0.0600**
(0.0254)
-0.0341
(0.0254)
-0.0130
(0.0282)
-0.0279**
(0.0117)
0.0408
(0.0685)
-0.0561***
(0.0113)

Constant
26.3709***
(9.9252)
-1.1681
(5.8407)
15.2320***
(4.7146)
-73.4980
(89.5713)
19.8220*
(10.3429)
18.2133***
(5.4703)
23.9716**
(11.5248)
27.3162***
(2.7312)
21.8549***
(5.2717)
-46.8596**
(23.1493)
3.1206
(4.7594)
9.9272
(6.8726)
16.5408***
(2.9150)
22.1756***
(2.7594)
8.5850
(8.4696)
27.7238***
(2.4282)
30.7542***
(6.2159)
36.0865***
(5.8617)
-4.7304
(10.1845)
13.8654**
(5.7861)
16.9740***
(6.0182)
44.4742***
(5.4146)
32.7677***
(6.0260)
61.2547***
(4.9501)
18.7166***
(1.7175)
-2.7018
(11.4048)
24.6738***
(1.4797)

N
40

R2 Adj
0.538

J stat (p-val)
12.39 (0.135)

27

0.122

8.545 (0.382)

71

0.420

13.04 (0.194)

16

0.800

1.828 (0.000)

32

0.564

10.15 (0.000)

36

0.791

9.812 (0.199)

51

0.696

6.573 (0.475)

22

0.868

7.813 (0.452)

70

0.112

6.350 (0.005)

14

0.892

4.408 (0.282)

17

0.833

10.51 (0.231)

16

0.660

9.508 (0.002)

181

0.475

38.36 (0.008)

109

0.356

3.985 (0.000)

62

0.441

10.69 (0.000)

320

0.593

15.07 (0.06)

37

0.689

7.684 (0.843)

44

0.874

8.592 (0.442)

30

0.127

3.038 (0.000)

16

0.858

10.69 (0.220)

35

0.644

3.608 (0.824)

25

0.913

10.95 (0.173)

39

0.628

4.746 (0.000)

41

0.903

20.64 (0.000)

795

0.075

40.26 (0.000)

22

0.437

10.24 (0.175)

2,285

0.370

15.26 (0.0543)

31

Table 5 Reliable bank-level determinants


This table depicts the relationships between bank-level determinants and the bank capital ratio using country-by-country (separated) regressions
and the regression on the whole sample (pooled regression). The first two columns of each panel report the number (and proportion over the
total significant coefficients) of countries for which the given determinants have a particular sign at the 90% confidence level at least. For
example, there are 14 countries (over 15 countries that have significant coefficients, i.e., 93%) in which collateral has a positive and significant
impact on the Tier 1 ratio, and only 1 country (i.e., 7%) that exhibits a negative and significant impact. Column (3) shows the number of
countries that have significant coefficients for the given determinants, and the proportion over the total regressions (25 and 26, respectively,
for the risk- and non-risk based capital ratio). Similarly, columns (4) and (5) report whether the given determinants have a particular sign at
the 90% confidence level at minimum. In other words, if the given determinant is of a particular sign and statistically significant at the 90%
confidence level or higher, we assign it a score of 1. Determinants that have insignificant coefficient estimates are assigned the value zero. For
instance, by regressing for the whole sample, we obtain the positive and significant effect of profitability on the bank risk-based capital ratio
(Tier 1 ratio).
Panels C and D report whether the given determinant is a core factor among the bank-level determinants of capital structure by requiring a
minimum score of 13 using the separation method and a score equal to 1 using the pooled method.
(1)
(2)
(3)
(4)
(5)
(1)
(2)
(3)
(4)
(5)
Panel A
Panel B
Tier 1 ratio
Equity-to-assets ratio
Separated
Pooled
Separated
Pooled
Positive Negative Total
Positive Negative
Positive Negative Total
Positive Negative
Collateral
14
1
15
1
0
5
6
11
0
1
(93%)
(7%)
(60%)
(45%)
(55%)
(42%)
Size
2
12
14
0
1
2
16
18
0
1
(14%)
(86%)
(56%)
(11%)
(89%)
(69%)
Profit
12
2
14
1
0
15
0
15
1
0
(86%)
(14%)
(56%)
(100%)
(0%)
(58%)
Gr.Opportunities
5
11
16
0
1
3
7
10
0
1
(31%)
(69%)
(64%)
(30%)
(70%)
(38%)
Risk
8
3
11
1
0
10
2
12
1
0
(73%)
(27%)
(44%)
(83%)
(17%)
(46%)
Liquidity
1
10
11
0
1
3
12
15
0
1
creation
(9%)
(91%)
(44%)
(20%)
(80%)
(58%)
(1)

(2)

(3)

(4)

Panel C
Tier 1 ratio

Collateral
Size
Profit
Gr.Opportunities
Risk
Liquidity creation

Separated
Positive Negative
YES
YES
YES
YES
YES
YES

Pooled
Positive Negative
YES
YES
YES
YES

(5)

(6)

(7)
(8)
Panel D
Equity-to-assets ratio
Separated
Pooled
Positive Negative
Positive Negative
YES
YES
YES
YES
YES
YES
YES
YES
YES

Table 6 Country effects on bank capital differences


We allocate the bank capital ratio (Tier 1 ratio and Equity to Assets ratio) into portfolios according to the median of each country-level
determinants (weak and strong). Only type of law is divided by civil law and common law, denoted respectively weak and strong. We perform
the Wilcoxon rank-sum test, which is also known as the MannWhitney two-sample statistic to test the equality between groups. *,**,***
indicate significant difference between groups at the 10%, 5% and 1% significance level, respectively.
Tier 1 ratio
Equity/Assets ratio
Weak Strong Difference
Weak Strong Difference
Regulation
Capital regulation
11.52
12.79
1.27***
8.38
9.42
1.05***
Prompt corrective actions
11.80
12.17
0.37***
8.62
8.92
0.30***
Monitoring
Independence
12.03
12.24
0.20***
8.80
8.96
0.16*
Private monitor index
11.06
11.44
0.38***
8.10
8.65
0.55***
External governance
10.71
12.29
1.59***
7.21
9.19
1.98***
Deposit insurance
Deposit insurer power
11.36
12.51
1.15***
8.17
9.25
1.08***
Market structure
Competition
12.60
11.00
(1.6) ***
9.47
7.82
(1.65) ***
Legal system
Creditor right
11.45
11.96
0.51***
8.36
8.66
0.31*
Type of Law
11.39
12.06
0.67***
8.14
8.93
0.79***
Economic conditions
Gdp
12.04
11.91
(0.13) ***
8.68
8.74
0.07

32

Table 7 Direct and indirect impacts of country-specific determinants on bank capital ratio
This table shows the direct (row 7) and the indirect (row 8 to 13) impacts of country-specific determinants on the risk- and non-risk based capital ratio (Panel A and B respectively). We run the equation (3) for each country-level determinants
(column 1 to 7). K ijt = + b Xijt + c Yjt + bc Zijt + uijt (3), with i, j, t denote banks, countries and time; Xijt vector of bank-level factors of bank i in country j including profitability, growth opportunities, risk, size, collateral and
liquidity creation; Yij vector of 7 country-level determinants of each country j : competition, regulation, monitoring, deposit insurer power, economic conditions, legal system; Zijt vector of interaction term between the banks- and the countrylevel determinants; uijt random error term. All variables are standardized to easy interpretation. Robust standard errors in parentheses; ***, **, * denote statistical significance at the 1%, 5% and 10% level, respectively.
Panel A: Tier 1 ratio
Panel B: Equity/Assets ratio
(1)
(2)
(3)
(4)
(5)
(6)
(1)
(2)
(3)
(4)
(5)
(6)
#
Variables
Regulation Monitoring
Deposit
Competition
Legal
Macro
Regulation Monitoring
Deposit
Competition
Legal
Macro
(IH1,2)
(IH3)
(IH4)
(IH5)
(IH6,7)
(IH8,9)
(IH1,2)
(IH3)
(IH4)
(IH5)
(IH6,7)
(IH8,9)
1

Collateral
Arbitrage strat./Agency
Size
Bankruptcy
Profitability
Asymmetry
Growth opportunities
Agency
Risk
Bankruptcy
Liquidity creation

Direct impacts
Country determinants (C)

2
3
4
5

13

Indirect impacts
Collateral*C
Agency
Size*C
Bankruptcy
Profitability*C
Asymmetry
Growth opportunities*C
Agency
Risk*C
Bankruptcy
Liquidity creation*C

14

Constant

15
16
17
18

Observations
Adj. R2
Hansen J stat
p-value

8
9
10
11
12

0.208***
(0.040)
-0.246***
(0.033)
0.208***
(0.070)
-0.176***
(0.067)
0.135*
(0.077)
-0.119*
(0.061)

0.295***
(0.060)
-0.259***
(0.045)
0.260**
(0.102)
0.044
(0.041)
0.069
(0.060)
-0.185***
(0.060)

0.235***
(0.039)
-0.257***
(0.038)
0.338***
(0.060)
-0.144***
(0.023)
0.191***
(0.043)
-0.149***
(0.057)

0.285***
(0.048)
-0.315***
(0.029)
0.244***
(0.070)
-0.129***
(0.042)
0.115**
(0.052)
-0.166**
(0.073)

0.269***
(0.051)
-0.272***
(0.034)
0.283***
(0.080)
-0.136***
(0.037)
0.124**
(0.049)
-0.163***
(0.055)

0.286***
(0.038)
-0.319***
(0.030)
0.269***
(0.065)
-0.137***
(0.039)
0.129***
(0.049)
-0.176**
(0.080)

-0.110**
(0.048)
-0.305***
(0.056)
0.471***
(0.066)
-0.137***
(0.049)
0.263***
(0.086)
-0.229***
(0.056)

0.013
(0.049)
-0.291***
(0.036)
0.517***
(0.078)
0.043
(0.033)
0.294***
(0.056)
-0.258***
(0.050)

-0.075*
(0.044)
-0.324***
(0.063)
0.545***
(0.071)
-0.087***
(0.033)
0.240***
(0.039)
-0.255***
(0.065)

-0.073**
(0.035)
-0.352***
(0.038)
0.531***
(0.075)
-0.064**
(0.030)
0.189***
(0.035)
-0.244***
(0.062)

-0.068**
(0.034)
-0.319***
(0.041)
0.539***
(0.073)
-0.069*
(0.035)
0.196***
(0.030)
-0.240***
(0.046)

-0.074**
(0.036)
-0.355***
(0.041)
0.551***
(0.065)
-0.088***
(0.030)
0.236***
(0.057)
-0.265***
(0.067)

0.501
(0.529)

0.226
(0.711)

0.296
(0.296)

0.276
(0.232)

-0.173
(0.360)

-0.425
(0.367)

0.530
(0.432)

1.508***
(0.533)

0.120
(0.354)

0.747***
(0.197)

-0.365
(0.252)

-0.933***
(0.313)

0.138
(0.097)
-0.543*
(0.313)
0.048
(0.057)
0.069
(0.084)
0.017
(0.084)
0.025
(0.215)
0.169*
(0.092)
1,157
0.250
10.25
0.115

-0.236**
(0.101)
0.021
(0.418)
-0.202***
(0.069)
-0.093
(0.140)
0.001
(0.075)
0.315*
(0.185)
-0.071
(0.076)
398
0.382
9.679
0.139

0.133***
(0.050)
-0.350
(0.225)
-0.016
(0.060)
-0.087*
(0.049)
-0.009
(0.043)
0.162
(0.144)
0.218***
(0.042)
1,287
0.302
6.012
0.422

-0.173
(0.177)
-0.044
(0.200)
-0.019
(0.030)
-0.006
(0.039)
-0.013
(0.046)
-0.078
(0.283)
0.259***
(0.085)
1,544
0.297
7.624
0.267

0.000
(0.067)
-0.000
(0.241)
0.009
(0.077)
-0.077*
(0.042)
0.071
(0.055)
0.315*
(0.178)
0.222***
(0.056)
1,482
0.301
7.420
0.284

-0.024
(0.095)
0.272
(0.285)
0.139***
(0.044)
0.058
(0.059)
0.051
(0.032)
-0.095
(0.193)
0.226***
(0.077)
1,538
0.309
8.756
0.188

0.162*
(0.097)
-0.351
(0.304)
-0.066
(0.098)
0.130*
(0.071)
-0.168
(0.118)
-0.097
(0.134)
0.055
(0.071)
1,216
0.285
5.189
0.520

-0.286***
(0.096)
-0.678**
(0.315)
-0.240***
(0.066)
-0.271***
(0.100)
-0.067
(0.059)
0.097
(0.165)
-0.097*
(0.057)
410
0.526
20.97
0.002

0.091
(0.072)
-0.014
(0.302)
-0.031
(0.130)
-0.079
(0.059)
-0.101
(0.073)
0.068
(0.169)
0.129***
(0.044)
1,344
0.357
6.326
0.388

-0.053
(0.062)
-0.554***
(0.141)
-0.090***
(0.018)
-0.048
(0.057)
-0.013
(0.031)
-0.120
(0.183)
0.119*
(0.065)
1,657
0.407
4.811
0.568

0.027
(0.088)
0.345*
(0.192)
-0.154
(0.114)
-0.006
(0.044)
-0.092*
(0.052)
0.244*
(0.138)
0.136***
(0.049)
1,592
0.408
4.619
0.593

0.042
(0.066)
0.570**
(0.244)
0.090
(0.076)
0.104**
(0.052)
0.014
(0.053)
0.057
(0.174)
0.080
(0.060)
1,651
0.390
4.829
0.566

33

Table 8 Impacts of bank- and country-level determinants on alternative definitions of capital


This table shows the impacts of bank-level determinants (column (1)) and the impacts of country-level determinants (columns (2) to (7)) on the total capital ratio (panel A) and on the common equity over asset ratio (panel B). We run the
equation (3) for each country-level determinants (column 1 to 7). K ijt = + b Xijt + c Yjt + bc Zijt + uijt (3), with i, j, t denote banks, countries and time; Xijt vector of bank-level factors of bank i in country j including profitability,
growth opportunities, risk, size, collateral and liquidity creation; Yij vector of 7 country-level determinants of each country j : competition, regulation, monitoring, deposit insurer power, economic conditions, legal system; Zijt vector of
interaction term between the banks- and the country-level determinants; uijt random error term. All variables are standardized to easy interpretation. Robust standard errors in parentheses; ***, **, * denote statistical significance at the 1%,
5% and 10% level, respectively.
Panel A: Total capital ratio
Panel B: Common equity/Assets ratio
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
#
Variables
Bank-level
Regulation Monitoring Deposit
Competition
Legal
Macro
Bank-level
Regulation Monitoring Deposit
Competition
Legal
Macro
determinant (IH1,2)
(IH3)
(IH4)
(IH5)
(IH6,7)
(IH8,9)
determinant
(IH1,2)
(IH3)
(IH4)
(IH5)
(IH6,7)
(IH8,9)
1

Collateral
Arbitrage
Size
Bankruptcy
Profitability
Asymmetry
Growth opportunities
Agency
Risk
Bankruptcy
Liquidity creation

Direct impacts
Country determinants (C)

2
3
4
5

13

Indirect impacts
Collateral*C
Agency
Size*C
Bankruptcy
Profitability*C
Asymmetry
Growth opportunities*C
Agency
Risk*C
Bankruptcy
Liquidity creation*C

14

Constant

15

Observations

16
17
18

Adj. R2
Hansen J stat
p-value

8
9
10
11
12

0.045***
(0.008)
-0.563***
(0.064)
1.047***
(0.188)
-0.274***
(0.095)
0.129***
(0.039)
-0.060***
(0.012)

25.467***
(1.533)
2,236
0.313
10.36
0.241

0.898***
(0.185)
-0.871***
(0.117)
1.245***
(0.256)
-0.469**
(0.189)
0.810**
(0.323)
-0.769***
(0.233)

1.277***
(0.298)
-1.089***
(0.191)
1.053**
(0.422)
0.181
(0.113)
0.469
(0.459)
-0.742***
(0.265)

0.928***
(0.134)
-0.840***
(0.154)
1.689***
(0.280)
-0.443***
(0.104)
1.063***
(0.240)
-0.888***
(0.221)

0.247***
(0.037)
-0.238***
(0.031)
0.319***
(0.065)
-0.066**
(0.028)
0.177***
(0.065)
-0.214***
(0.069)

1.678
(1.565)

2.959
(2.261)

2.745***
(1.031)

0.037
(0.213)

0.220
(0.504)
-1.942**
(0.912)
0.094
(0.222)
0.170
(0.202)
0.063
(0.252)
0.305
(0.817)
14.861***
(0.238)

-0.601
(0.416)
-0.661
(1.545)
-0.860***
(0.230)
-0.361
(0.247)
-0.153
(0.407)
-0.125
(0.356)
14.252***
(0.286)

0.649***
(0.189)
-2.090***
(0.683)
-0.152
(0.272)
-0.389**
(0.185)
-0.010
(0.171)
-0.293
(0.546)
14.918***
(0.135)

0.015
(0.108)
0.060
(0.162)
-0.022
(0.035)
-0.036
(0.027)
0.000
(0.048)
-0.103
(0.211)
0.202***
(0.078)

1,256

426

1,394

0.278
0.270
10.05

0.415
0.397
4.746

0.344
0.338
8.969

1,623
0.327
8.404
0.210

1.063***
(0.173)
-0.915***
(0.143)
1.561***
(0.317)
-0.333***
(0.105)
0.796***
(0.251)
-1.102***
(0.243)

0.993***
(0.161)
-1.080***
(0.124)
1.499***
(0.238)
-0.315**
(0.144)
0.769***
(0.237)
-0.973***
(0.293)

0.421
(1.251)

-0.003*
(0.002)
-0.169***
(0.017)
0.353***
(0.050)
-0.059***
(0.016)
0.028***
(0.009)
-0.014***
(0.003)

-0.101***
(0.037)
-0.314***
(0.046)
0.419***
(0.060)
-0.093**
(0.042)
0.229***
(0.059)
-0.225***
(0.050)

0.021
(0.056)
-0.310***
(0.047)
0.333***
(0.061)
0.008
(0.043)
0.173***
(0.040)
-0.273***
(0.079)

-0.068
(0.045)
-0.331***
(0.059)
0.450***
(0.084)
-0.084**
(0.036)
0.185***
(0.041)
-0.265***
(0.063)

-0.047
(0.040)
-0.378***
(0.044)
0.446***
(0.073)
-0.072***
(0.022)
0.121***
(0.033)
-0.303***
(0.074)

-0.042
(0.034)
-0.327***
(0.042)
0.431***
(0.084)
-0.064***
(0.023)
0.130***
(0.035)
-0.272***
(0.058)

-0.061
(0.040)
-0.357***
(0.042)
0.443***
(0.079)
-0.068**
(0.028)
0.162***
(0.047)
-0.268***
(0.065)

-2.646*
(1.356)

-0.227
(0.382)

0.885*
(0.478)

0.000
(0.385)

0.930***
(0.203)

-0.376
(0.358)

-0.747***
(0.265)

0.280
(0.230)
-0.668
(0.850)
-0.078
(0.332)
-0.249**
(0.105)
0.405*
(0.229)
0.584
(0.676)
14.880***
(0.166)

-0.170
(0.300)
1.068
(1.066)
0.702***
(0.183)
0.174
(0.207)
0.239
(0.225)
0.673
(0.686)
14.902***
(0.303)

0.147**
(0.074)
0.039
(0.268)
-0.013
(0.091)
0.084
(0.058)
-0.158*
(0.081)
0.201*
(0.112)
0.134***
(0.044)

-0.213
(0.154)
-0.325
(0.284)
-0.169***
(0.050)
-0.136
(0.090)
-0.008
(0.054)
0.021
(0.195)
-0.118
(0.089)

0.042
(0.071)
0.009
(0.286)
0.010
(0.111)
-0.041
(0.048)
-0.039
(0.073)
0.109
(0.184)
0.116***
(0.029)

-0.082
(0.075)
-0.708***
(0.194)
-0.077***
(0.021)
-0.081***
(0.029)
-0.020
(0.033)
-0.110
(0.206)
0.121*
(0.066)

-0.019
(0.078)
0.372*
(0.194)
-0.127
(0.084)
-0.001
(0.033)
-0.071**
(0.035)
0.231
(0.222)
0.098***
(0.036)

0.023
(0.056)
0.481**
(0.221)
0.092
(0.070)
0.042
(0.032)
-0.002
(0.043)
0.081
(0.135)
0.075
(0.053)

1,616

1,708

1,283

435

1,422

1,649

1,742

0.350
0.345
9.347

0.349
0.344
10.12

0.316
0.309
8.427

0.524
0.509
8.336

0.361
0.355
10.87

0.412
0.407
6.355

0.391
0.387
10.57

3.654***
(0.400)
2,285
0.362
14.16
0.0776

1,657
0.392
5.812
0.445

34

Table 9 Direct and indirect impacts of country-specific determinants on bank capital ratio for sample excluding US
This table shows the direct (row 7) and the indirect (row 8 to 13) impacts of country-specific determinants on the risk- and non-risk based capital ratio (Panel A and B respectively) for sample excluding US. We run the equation (3) for each
country-level determinants (column 1 to 7). K ijt = + b Xijt + c Yjt + bc Zijt + uijt (3), with i, j, t denote banks, countries and time; Xijt vector of bank-level factors of bank i in country j including profitability, growth opportunities,
risk, size, collateral and liquidity creation; Yij vector of 4 country-level determinants of each country j : regulation, concentration, legal system, economic conditions; Zijt vector of interaction term between the banks- and the country-level
determinants; uijt random error term. We do not report results of monitoring index, deposit insurer power since we do not have enough observations. All variables are standardized to easy interpretation. Robust standard errors in parentheses;
***, **, * denote statistical significance at the 1%, 5% and 10% level, respectively.
Panel A: Tier 1 ratio
Panel B: Equity to assets ratio
(1)
(2)
(3)
(4)
(5)
(1)
(2)
(3)
(4)
(5)
VARIABLES
Bank-level
Regulation Competition
Legal
Macro
Bank-level
Regulation
Competition
Legal
Macro
Determinants
(IH1,2)
(IH 5)
(IH6,7)
(IH8,9)
determinants
(IH1,2)
(IH 5)
(IH6,7)
(IH8,9)
1

Collateral
Arbitrage strat./Agency
Size
Bankruptcy
Profitability
Asymmetry
Growth opportunities
Agency
Risk
Bankruptcy
Liquidity creation

Direct impacts
Country determinants (C)

2
3
4
5

0.055***
(0.012)
-0.612***
(0.099)
1.045***
(0.310)
-0.347***
(0.097)
0.128**
(0.059)
-0.057***
(0.015)

0.191***
(0.053)
-0.222***
(0.041)
0.193**
(0.091)
-0.127*
(0.065)
0.119
(0.080)
-0.154**
(0.070)

0.282***
(0.066)
-0.272***
(0.049)
0.261**
(0.106)
-0.089***
(0.032)
0.101
(0.077)
-0.233***
(0.071)

0.262***
(0.087)
-0.194***
(0.060)
0.353***
(0.105)
-0.147
(0.149)
0.195***
(0.073)
-0.204*
(0.112)

0.269***
(0.060)
-0.290***
(0.047)
0.247***
(0.093)
-0.115**
(0.054)
0.115*
(0.068)
-0.240***
(0.077)

0.090
(0.552)

0.081
(0.369)

-1.118
(0.913)

-0.107
(0.286)
-0.031
(0.406)
-0.019
(0.032)
0.031
(0.078)
0.033
(0.050)
0.020
(0.325)
0.102
(0.072)
958
9.039
0.171
0.102

13

Indirect impacts
Collateral*C
Agency
Size*C
Bankruptcy
Profitability*C
Asymmetry
Growth opportunities*C
Agency
Risk*C
Bankruptcy
Liquidity creation*C

14

Constant

22.827***
(2.257)

0.059
(0.071)
-0.190
(0.307)
0.069
(0.065)
0.056
(0.075)
0.028
(0.078)
0.020
(0.260)
0.093
(0.090)

15
16
17
18

Observations
R2adj
Hansen J stat
p-value

1,260
0.355
7.976
0.436

589
0.226
14.68
0.0229

8
9
10
11
12

-0.017*
(0.009)
-0.739***
(0.102)
1.938***
(0.246)
-0.192
(0.118)
0.244***
(0.046)
-0.067***
(0.010)

-0.092
(0.061)
-0.361***
(0.048)
0.474***
(0.078)
-0.126**
(0.055)
0.265***
(0.086)
-0.284***
(0.059)

-0.073
(0.048)
-0.348***
(0.053)
0.596***
(0.093)
-0.056
(0.037)
0.239***
(0.032)
-0.290***
(0.055)

-0.092
(0.059)
-0.324***
(0.060)
0.644***
(0.091)
-0.064
(0.125)
0.283***
(0.032)
-0.329***
(0.085)

-0.095*
(0.051)
-0.360***
(0.048)
0.596***
(0.083)
-0.109***
(0.034)
0.312***
(0.056)
-0.317***
(0.052)

-0.502
(0.330)

0.489
(0.533)

0.546
(0.358)

-0.493
(0.625)

-0.944***
(0.325)

-0.047
(0.170)
0.804*
(0.427)
0.184**
(0.091)
-0.102
(0.230)
0.191*
(0.112)
0.108
(0.462)
0.102
(0.072)

0.012
(0.105)
0.256
(0.249)
0.154***
(0.050)
0.065
(0.065)
0.044
(0.038)
-0.004
(0.173)
0.094
(0.071)

24.100***
(1.960)

0.119
(0.089)
-0.404
(0.366)
0.037
(0.061)
0.097
(0.067)
-0.069
(0.088)
-0.138
(0.190)
0.007
(0.061)

-0.003
(0.074)
-0.484
(0.347)
-0.099***
(0.021)
0.038
(0.067)
0.009
(0.031)
-0.106
(0.208)
0.006
(0.057)

-0.129
(0.150)
0.543
(0.383)
0.150
(0.108)
-0.011
(0.199)
0.107*
(0.056)
-0.174
(0.321)
0.006
(0.057)

0.107**
(0.054)
0.531*
(0.273)
0.019
(0.053)
0.145***
(0.049)
-0.052
(0.036)
0.153
(0.148)
-0.031
(0.050)

958
9.039
0.171
0.102

952
0.361
10.09
0.121

1,373
0.500
10.79
0.214

628
0.427
6.578
0.362

1,050
10.98
0.0890
0.006

1,050
10.98
0.0890
0.006

1,044
0.525
11.35
0.0782

35

Table 10 Emerging and developed countries


This table shows the direct (row 7) and the indirect (row 8 to 13) impacts of country-specific determinants on the risk- and non-risk based capital ratio (Panel A and B respectively) for sample excluding US. We run the equation (3) for each
country-level determinants (column 1 to 7). K ijt = + b Xijt + c Yjt + bc Zijt + uijt (3), with i, j, t denote banks, countries and time; Xijt vector of bank-level factors of bank i in country j including profitability, growth opportunities,
risk, size, collateral and liquidity creation; ; Yij vector of 7 country-level determinants of each country j : competition, regulation, monitoring, deposit insurer power, economic conditions, legal system; Zijt vector of interaction term between
the banks- and the country-level determinants; uijt random error term. All variables are standardized to easy interpretation. Robust standard errors in parentheses; ***, **, * denote statistical significance at the 1%, 5% and 10% level,
respectively.
Panel A:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
Tier 1 ratio
Regulation
Monitoring
Deposit
Competition
Legal
Macro
Emerging
Developed Emerging Developed Emerging Developed Emerging Developed Emerging Developed Emerging Developed Emerging Developed
Collateral
Arbitrage strat./Agency
Size
Bankruptcy
Profitability
Asymmetry
Growth opportunities
Agency
Risk
Bankruptcy
Liquidity creation

0.055***
(0.015)
-0.625***
(0.115)
1.015***
(0.392)
-0.032
(0.156)
0.183***
(0.049)
-0.045**
(0.020)

0.056***
(0.011)
-0.782***
(0.097)
1.127***
(0.381)
-0.737***
(0.191)
0.054
(0.066)
-0.061***
(0.016)

Direct impacts
Country determinants (C)
Indirect impacts
Collateral*C
Agency
Size*C
Bankruptcy
Profitability*C
Asymmetry
Growth opportunities*C
Agency
Risk*C
Bankruptcy
Liquidity creation*C

Constant
Observations
Adj. R2
Hansen J stat
p-value

21.393***
(3.153)
719
0.331
10.36
0.241

27.601***
(2.686)
1,305
0.314
53.19
9.93e-09

0.106**
(0.046)
-0.148***
(0.045)
0.223***
(0.084)
-0.088
(0.106)
0.302***
(0.067)
-0.035
(0.053)

0.253***
(0.046)
-0.301***
(0.033)
0.277***
(0.092)
-0.184***
(0.054)
0.062
(0.069)
-0.222***
(0.052)

0.262**
(0.111)
-0.325***
(0.068)
0.152
(0.197)
0.182**
(0.072)
0.107
(0.088)
-0.283***
(0.108)

0.117
(0.117)
-0.151**
(0.068)
0.178
(0.205)
0.003
(0.063)
0.022
(0.184)
0.026
(0.090)

0.231***
(0.074)
-0.253***
(0.046)
0.223***
(0.077)
-0.009
(0.062)
0.250***
(0.048)
-0.117
(0.107)

0.239***
(0.037)
-0.296***
(0.038)
0.410***
(0.089)
-0.249***
(0.048)
0.139**
(0.061)
-0.214***
(0.049)

0.300***
(0.056)
-0.282***
(0.036)
0.190**
(0.085)
0.006
(0.037)
0.197***
(0.048)
-0.161**
(0.063)

0.244***
(0.035)
-0.357***
(0.033)
0.360***
(0.078)
-0.212***
(0.033)
0.081
(0.058)
-0.265***
(0.051)

0.201***
(0.058)
-0.237***
(0.040)
0.234***
(0.083)
0.038
(0.051)
0.206***
(0.042)
-0.141**
(0.071)

0.263***
(0.034)
-0.296***
(0.036)
0.359***
(0.093)
-0.268***
(0.047)
0.102*
(0.061)
-0.235***
(0.048)

0.348***
(0.061)
-0.286***
(0.036)
0.190**
(0.081)
0.012
(0.090)
0.236***
(0.051)
-0.106
(0.066)

0.245***
(0.035)
-0.344***
(0.033)
0.373***
(0.079)
-0.221***
(0.042)
0.092
(0.062)
-0.236***
(0.052)

0.909*
(0.550)

-0.237
(0.424)

-1.128
(1.140)

1.576*
(0.868)

0.455
(0.548)

-0.165
(0.392)

0.476
(0.310)

-2.067**
(0.969)

0.189
(0.500)

-0.615
(0.439)

-0.029
(0.369)

-0.126
(0.397)

-0.023
(0.091)
-0.684**
(0.313)
0.058
(0.079)
0.114
(0.134)
-0.117
(0.082)
-0.142
(0.210)

0.149*
(0.089)
-0.000
(0.256)
-0.003
(0.057)
0.003
(0.069)
0.093
(0.071)
0.198
(0.181)

-0.276
(0.221)
0.930
(0.605)
-0.142**
(0.072)
0.343
(0.321)
0.088
(0.108)
0.301
(0.343)

0.205
(0.204)
-0.927*
(0.540)
-0.216
(0.174)
-0.029
(0.139)
-0.139
(0.189)
-0.337
(0.282)

0.102
(0.106)
-0.600**
(0.302)
-0.099*
(0.057)
0.017
(0.096)
-0.027
(0.048)
0.292
(0.303)

0.110
(0.067)
-0.009
(0.238)
-0.033
(0.061)
-0.141**
(0.063)
0.051
(0.059)
0.248
(0.169)

-0.238*
(0.143)
-0.219
(0.214)
-0.010
(0.028)
0.046
(0.067)
-0.041
(0.052)
-0.096
(0.201)

0.188
(0.246)
0.875
(0.785)
-0.186
(0.176)
0.167
(0.154)
-0.017
(0.125)
0.826*
(0.446)

-0.321***
(0.114)
-0.039
(0.309)
-0.027
(0.062)
0.074
(0.068)
0.100*
(0.057)
0.083
(0.221)

0.100
(0.075)
0.342
(0.247)
-0.044
(0.082)
-0.146**
(0.062)
0.045
(0.057)
0.375*
(0.193)

-0.092
(0.086)
0.304
(0.210)
0.173***
(0.054)
-0.038
(0.109)
-0.047
(0.047)
-0.420**
(0.175)

-0.066
(0.075)
0.052
(0.255)
0.189**
(0.078)
0.023
(0.045)
0.064
(0.074)
-0.030
(0.148)

-0.024
(0.070)
379
0.233
6.253
0.395

0.352***
(0.054)
778
0.310
33.89
7.06e-06

0.006
(0.151)
175
0.495
6.203
0.401

-0.258**
(0.120)
223
0.173
4.802
0.569

0.140**
(0.058)
445
0.360
6.364
0.384

0.308***
(0.036)
842
0.300
29.17
5.66e-05

0.107**
(0.047)
572
0.342
4.752
0.576

0.315***
(0.030)
972
0.311
37.05
1.72e-06

0.064
(0.048)
539
0.346
7.329
0.291

0.278***
(0.036)
943
0.318
32.53
1.29e-05

0.164***
(0.052)
569
0.372
10.07
0.122

0.324***
(0.033)
969
0.312
39.35
6.12e-07

36

Panel B:
Equity/Assets ratio

Collateral
Arbitrage strat./Agency
Size
Bankruptcy
Profitability
Asymmetry
Growth opportunities
Agency
Risk
Bankruptcy
Liquidity creation

(1)

(2)

Emerging
-0.020
(0.017)
-0.640***
(0.118)
1.693***
(0.323)
-0.061
(0.136)
0.249***
(0.054)
-0.075***
(0.018)

(5)

(6)
Monitoring
Emerging Developed

(7)

(8)
Deposit
Emerging Developed

(9)

(10)
Competition
Emerging Developed

(11)

(12)
Legal
Emerging Developed

(13)

Developed

(4)
Regulation
Emerging Developed

-0.020**
(0.008)
-0.811***
(0.086)
1.685***
(0.364)
-0.338***
(0.131)
0.070
(0.050)
-0.055***
(0.013)

-0.080
(0.059)
-0.241***
(0.049)
0.407***
(0.078)
-0.149*
(0.087)
0.481***
(0.081)
-0.174***
(0.064)

-0.100***
(0.034)
-0.343***
(0.028)
0.391***
(0.076)
-0.094**
(0.039)
0.067
(0.051)
-0.229***
(0.043)

-0.085
(0.108)
-0.251***
(0.059)
0.374**
(0.165)
0.128**
(0.065)
0.337***
(0.081)
-0.349***
(0.102)

-0.101
(0.067)
-0.298***
(0.051)
0.472***
(0.135)
-0.005
(0.047)
0.249**
(0.121)
-0.086
(0.077)

-0.090
(0.069)
-0.298***
(0.048)
0.389***
(0.082)
-0.029
(0.047)
0.326***
(0.059)
-0.350***
(0.084)

-0.095***
(0.030)
-0.351***
(0.037)
0.566***
(0.076)
-0.123***
(0.039)
0.133***
(0.048)
-0.236***
(0.044)

-0.054
(0.046)
-0.311***
(0.031)
0.481***
(0.066)
-0.012
(0.029)
0.292***
(0.048)
-0.269***
(0.050)

-0.098***
(0.028)
-0.408***
(0.030)
0.523***
(0.066)
-0.098***
(0.023)
0.090**
(0.045)
-0.283***
(0.044)

-0.149***
(0.052)
-0.254***
(0.036)
0.464***
(0.066)
0.005
(0.042)
0.269***
(0.047)
-0.247***
(0.057)

-0.083***
(0.027)
-0.338***
(0.031)
0.544***
(0.068)
-0.122***
(0.037)
0.128***
(0.045)
-0.273***
(0.040)

-0.038
(0.052)
-0.317***
(0.033)
0.456***
(0.067)
-0.077
(0.064)
0.375***
(0.056)
-0.253***
(0.058)

-0.096***
(0.027)
-0.402***
(0.030)
0.518***
(0.064)
-0.118***
(0.031)
0.069
(0.048)
-0.291***
(0.046)

1.031
(0.692)

0.225
(0.334)

1.149
(0.806)

1.182
(0.738)

0.758
(0.485)

-0.167
(0.394)

0.775***
(0.208)

-0.183
(1.270)

-0.280
(0.450)

-0.339
(0.337)

-1.401***
(0.393)

0.318
(0.371)

0.008
(0.095)
-0.533
(0.398)
-0.089
(0.083)
0.265**
(0.115)
-0.356***
(0.089)
-0.382
(0.265)

0.195***
(0.072)
-0.047
(0.229)
-0.017
(0.054)
0.025
(0.049)
-0.059
(0.048)
-0.147
(0.120)

-0.524**
(0.208)
-0.182
(0.463)
-0.221***
(0.062)
-0.115
(0.229)
-0.061
(0.080)
0.091
(0.320)

0.170
(0.134)
-0.592
(0.466)
-0.326***
(0.124)
-0.100
(0.109)
-0.212
(0.136)
-0.172
(0.238)

-0.166
(0.108)
-0.269
(0.313)
-0.010
(0.059)
-0.093
(0.068)
-0.090
(0.062)
-0.042
(0.231)

0.154**
(0.060)
0.146
(0.261)
-0.114
(0.075)
-0.070
(0.055)
-0.061
(0.053)
0.101
(0.154)

0.004
(0.067)
-0.629***
(0.183)
-0.077***
(0.020)
-0.055
(0.043)
-0.021
(0.031)
-0.146
(0.101)

0.141
(0.188)
0.302
(0.936)
-0.412**
(0.187)
0.156
(0.166)
-0.214*
(0.121)
-0.147
(0.542)

-0.407***
(0.099)
0.600**
(0.265)
-0.069
(0.060)
0.041
(0.059)
-0.010
(0.073)
0.084
(0.202)

0.190***
(0.061)
0.314
(0.203)
-0.237***
(0.070)
-0.023
(0.050)
-0.151***
(0.042)
0.197
(0.148)

0.111
(0.084)
0.840***
(0.224)
0.096*
(0.054)
0.156**
(0.073)
-0.051
(0.051)
0.109
(0.164)

-0.014
(0.054)
-0.156
(0.220)
0.148*
(0.080)
0.027
(0.040)
-0.018
(0.069)
-0.232
(0.145)

0.044
(0.079)
402
0.389
11.50
0.0742

0.092**
(0.038)
814
0.306
8.967
0.175

-0.151
(0.107)
183
0.613
10.43
0.108

-0.118
(0.084)
227
0.290
10.13
0.119

0.117***
(0.044)
467
0.465
10.84
0.0935

0.144***
(0.033)
877
0.306
12.84
0.0456

0.068*
(0.035)
603
0.489
10.38
0.109

0.134***
(0.026)
1,054
0.341
9.954
0.127

0.059
(0.039)
569
0.464
11.96
0.0628

0.107***
(0.029)
1,023
0.384
11.84
0.0657

0.092**
(0.041)
600
0.517
8.840
0.183

0.135***
(0.028)
1,051
0.355
11.27
0.0804

Direct impacts
Country determinants (C)
Indirect impacts
Collateral*C
Agency
Size*C
Bankruptcy
Profitability*C
Asymmetry
Growth opportunities*C
Agency
Risk*C
Bankruptcy
Liquidity creation*C

Constant
Observations
Adj. R2
Hansen J stat
p-value

23.365***
(2.900)
773
0.414
16.40
0.0371

26.091***
(2.138)
1,395
0.342
38.08
7.28e-06

(3)

(14)
Macro
Emerging Developed

37

Table 11 Banks financing behaviors after the financial crisis


This table shows the impacts of country-level determinants on bank capital ratio after the financial crisis. We run the equation (3) for each country-level determinants (column 1 to 7). = + + + + +
+ + (5), with i, j, t denote banks, countries and time; Xijt vector of bank-level factors of bank i in country j including profitability, growth opportunities, risk, size, collateral and liquidity creation; Yij vector of 7
country-level determinants of each country j : competition, regulation, monitoring, deposit insurer power, economic conditions, legal system; Zijt vector of interaction term between the banks- and the country-level determinants; Post dummy
variable equal to 1 for the period of 2010-2013; uijt random error term. All variables are standardized to easy interpretation. Robust standard errors in parentheses; ***, **, * denote statistical significance at the 1%, 5% and 10% level,
respectively.
Panel A: Tier 1 ratio
Panel B: Equity/Asset ratio
(1)
(2)
(3)
(4)
(5)
(6)
(1)
(2)
(3)
(4)
(5)
(6)
VARIABLES
Supervision Monitoring Deposit Competition
Legal
Macro
Supervision Monitoring Deposit Competition
Legal
Macro
1

Collateral
Arbitrage
Size
Bankruptcy
Profitability
Asymmetry
Growth opportunities
Agency
Risk
Bankruptcy
Liquidity creation

Direct impacts
Country determinants (C)

Indirect impacts
Collateral*C

Size*C

2
3
4
5

10 Profitability*C
11 Growth opportunities*C
12 Risk*C
13 Liquidity creation*C
Post crisis (P)
14 Post crisis (P)
15 Post crisis*C
16 Collateral*C*P
17 Size*C*P
18 Profitability*C*P
19 Growth opportunities*C*P

0.20***
(0.04)
-0.23***
(0.04)
0.18**
(0.07)
-0.22**
(0.10)
0.11
(0.07)
-0.10
(0.07)

0.33***
(0.08)
-0.32***
(0.08)
0.05
(0.15)
0.06
(0.07)
-0.16
(0.11)
-0.21***
(0.07)

0.22***
(0.04)
-0.24***
(0.04)
0.26***
(0.07)
-0.09**
(0.04)
0.15***
(0.05)
-0.16***
(0.05)

0.057***
(0.005)
-0.693***
(0.041)
0.952***
(0.124)
-0.202***
(0.070)
0.090***
(0.026)
-0.044***
(0.006)

0.27*** 0.27***
(0.05)
(0.04)
-0.28*** -0.31***
(0.04)
(0.04)
0.16*
0.15
(0.09)
(0.11)
-0.08
-0.04
(0.05)
(0.04)
0.06
0.05
(0.06)
(0.08)
-0.19*** -0.17**
(0.07)
(0.08)

-0.13***
(0.05)
-0.34***
(0.06)
0.46***
(0.07)
-0.18***
(0.06)
0.24***
(0.08)
-0.20***
(0.05)

0.05
(0.07)
-0.41***
(0.05)
0.40***
(0.10)
-0.01
(0.06)
0.16*
(0.10)
-0.22***
(0.06)

-0.09**
(0.04)
-0.34***
(0.06)
0.48***
(0.07)
-0.08
(0.06)
0.20***
(0.04)
-0.23***
(0.05)

-0.010**
(0.004)
-0.743***
(0.037)
1.380***
(0.105)
-0.062
(0.050)
0.097***
(0.019)
-0.051***
(0.005)

1.49**
(0.64)

-2.30
(1.49)

0.01
(0.61)

-6.125*
(3.660)

-2.00**
(0.86)

-0.09
(0.23)
-1.30***
(0.50)
-0.13
(0.14)
0.43**
(0.21)
-0.32***
(0.11)
0.13
(0.30)

-0.13
(0.20)
1.50
(0.92)
0.02
(0.15)
0.01
(0.22)
0.31**
(0.15)
0.58*
(0.32)

-0.02
(0.14)
0.13
(0.47)
-0.10
(0.11)
-0.10
(0.16)
-0.13**
(0.06)
0.21
(0.30)

-2.165**
(1.061)
5.995*
(3.375)
1.205*
(0.637)
-0.544
(0.417)
0.212
(0.589)
1.253
(1.886)

0.19***
(0.06)
-1.14*
(0.65)
0.00
(0.00)
0.05
(0.03)
0.14*
(0.08)
-0.13***

-0.12
(0.12)
2.47
(1.73)
-0.00
(0.01)
-0.09
(0.06)
-0.11
(0.11)
0.00

0.24***
(0.06)
0.46
(0.64)
0.00
(0.00)
-0.03
(0.03)
0.08
(0.07)
0.04

1.571***
(0.179)
3.555*
(1.968)
1.117
(0.950)
-3.226*
(1.928)
-0.595
(0.374)
0.324

-0.06* -0.10***
(0.03)
(0.04)
-0.34*** -0.37***
(0.04)
(0.05)
0.46*** 0.49***
(0.07)
(0.06)
-0.05
-0.06
(0.05)
(0.05)
0.16*** 0.19***
(0.03)
(0.06)
-0.27*** -0.26***
(0.06)
(0.07)

-0.45
(0.35)

1.23*
(0.68)

-0.80
(1.12)

0.37
(0.62)

-3.108
(2.751)

-1.00***
(0.32)

-0.31
(0.27)

-0.11
(0.12)
1.20**
(0.50)
-0.05
(0.15)
-0.05
(0.13)
0.08
(0.15)
0.92***
(0.31)

-0.04
(0.09)
0.27
(0.24)
-0.04
(0.13)
0.07
(0.11)
0.01
(0.08)
0.10
(0.20)

0.30
(0.29)
-1.08**
(0.50)
-0.23
(0.21)
0.42***
(0.15)
-0.42***
(0.11)
0.03
(0.20)

-0.11
(0.23)
0.73
(0.65)
-0.07
(0.16)
-0.08
(0.32)
0.12
(0.12)
0.23
(0.29)

0.02
(0.25)
-0.41
(0.46)
-0.13
(0.16)
-0.29**
(0.11)
-0.11**
(0.04)
0.49**
(0.22)

-1.659**
(0.757)
3.129
(2.513)
1.106
(0.696)
-0.518
(0.394)
0.039
(0.485)
0.961
(1.586)

0.01
(0.19)
0.91***
(0.30)
-0.26*
(0.15)
-0.02
(0.07)
-0.21***
(0.07)
0.37
(0.25)

-0.18**
(0.09)
0.44**
(0.19)
0.09
(0.08)
0.16**
(0.07)
-0.05
(0.05)
-0.14
(0.11)

0.21***
(0.07)
1.63***
(0.53)
0.00
(0.00)
-0.07***
(0.02)
0.11
(0.07)
0.01

0.23**
(0.09)
-0.36
(0.43)
0.00
(0.00)
0.01
(0.02)
0.15
(0.10)
-0.05

-0.04
(0.09)
-1.18*
(0.62)
-0.00
(0.00)
0.06**
(0.03)
0.13
(0.11)
-0.10**

-0.11
(0.09)
2.18
(1.41)
-0.00
(0.01)
-0.07
(0.05)
-0.17
(0.12)
0.04

0.04
(0.07)
-0.43
(0.55)
0.00
(0.00)
0.03
(0.02)
0.08
(0.05)
0.12***

0.683***
(0.156)
3.704**
(1.449)
1.140*
(0.649)
-3.403**
(1.433)
-0.715*
(0.367)
0.153

0.01
(0.07)
0.67***
(0.24)
0.00
(0.00)
-0.03**
(0.02)
0.09*
(0.05)
0.01

0.02
(0.08)
-0.87**
(0.40)
0.01***
(0.00)
0.01
(0.01)
0.01
(0.04)
-0.03

38

20 Risk*C*P
21 Liquidity creation*C*P

22 Constant
23
24
25
26

Observations
R2adj
Hansen J stat
p-value

(0.05)
0.05***
(0.02)
-0.00
(0.00)

(0.17)
-0.04
(0.03)
-0.01
(0.01)

(0.06)
0.02*
(0.01)
-0.00
(0.00)

(0.234)
-0.114
(0.535)
-0.896
(1.158)

(0.04)
0.01
(0.02)
-0.01***
(0.00)

(0.04)
0.01
(0.01)
0.00
(0.00)

(0.04)
0.04***
(0.01)
-0.00
(0.00)

(0.17)
-0.03
(0.03)
-0.01
(0.01)

(0.03)
0.00
(0.01)
-0.01*
(0.00)

(0.207)
-0.104
(0.419)
-1.010
(0.933)

(0.02)
0.02
(0.01)
-0.00*
(0.00)

(0.03)
0.01
(0.01)
0.00**
(0.00)

-0.02
(0.08)
1,072
0.226
13.13
0.0411

0.30
(0.20)
232
0.283
5.508
0.480

0.10*
(0.06)
1,115
0.275
8.123
0.229

22.664***
(1.102)
2,024
0.335
11.98
0.0625

0.12*
(0.07)
1,267
0.284
8.287
0.218

0.10*
(0.06)
1,343
0.276
8.595
0.198

0.12
(0.08)
1,127
0.265
6.729
0.347

0.26**
(0.12)
236
0.452
12.77
0.0468

0.20***
(0.06)
1,165
0.306
8.486
0.205

23.543***
(0.949)
2,168
0.413
42.13
1.73e-07

0.15**
(0.06)
1,368
0.368
4.418
0.620

0.13**
(0.06)
1,449
0.352
6.999
0.321

39

Table 12 Impacts of national culture on bank financing decisions


This table shows the direct (row 7) and the indirect (row 8 to 13) impacts of four cultural dimensions (Power distance, Collectivism/Individualism, Masculinity/Femininity and Uncertainty avoidance) on the risk- and non-risk based capital
ratio (Panel A and B respectively). We run the equation (3) for each cultural dimension (column 1 to 4). K ijt = + b Xijt + c Yjt + bc Zijt + uijt (3), with i, j, t denote banks, countries and time; Xijt vector of bank-level factors of bank
i in country j including profitability, growth opportunities, risk, size, collateral and liquidity creation; Yij vector of cultural dimensions of each country j; Zijt vector of interaction term between the banks- and the cultural dimensions; uijt
random error term. All variables are standardized to easy interpretation. Robust standard errors in parentheses; ***, **, * denote statistical significance at the 1%, 5% and 10% level, respectively.
Panel A: Tier 1 ratio
Panel B: Equity to asset ratio
(1)
(2)
(3)
(4)
(1)
(2)
(3)
(4)
VARIABLES
Power
Collectivism/
Masculinity/
Uncertainty
Power
Collectivism/
Masculinity/
Uncertainty
Distance
Individualism
Femininity
Avoidance
Distance
Individualism
Femininity
Avoidance
1

Collateral
Arbitrage strat./Agency
Size
Bankruptcy
Profitability
Asymmetry
Growth opportunities
Agency
Risk
Bankruptcy
Liquidity creation

Direct impacts
Country determinants (C)

2
3
4
5

13

Indirect impacts
Collateral*C
Agency
Size*C
Bankruptcy
Profitability*C
Asymmetry
Growth opportunities*C
Agency
Risk*C
Bankruptcy
Liquidity creation*C

14

Constant

15
16
17
18

Observations
R2adj
Hansen J stat
p-value

8
9
10
11
12

0.374***
(0.134)
-0.272
(0.184)
0.609
(0.378)
-0.568**
(0.224)
0.169
(0.208)
-0.160
(0.380)

0.346*
(0.182)
-0.233**
(0.100)
0.263
(0.248)
-0.070
(0.084)
0.351***
(0.134)
-0.224
(0.158)

0.369
(0.305)
0.017
(0.161)
0.452
(0.437)
-1.142**
(0.540)
0.626
(0.431)
0.178
(0.380)

0.268
(0.231)
-0.172
(0.131)
0.390
(0.301)
-0.287
(0.183)
0.142
(0.185)
-0.215
(0.236)

-0.264**
(0.120)
-0.383***
(0.113)
1.648***
(0.334)
-0.467***
(0.092)
0.485*
(0.262)
-0.532**
(0.208)

-0.178
(0.183)
-0.260***
(0.100)
0.937***
(0.236)
-0.064
(0.078)
0.645***
(0.135)
-0.416***
(0.144)

-0.478*
(0.274)
-0.224
(0.170)
2.129***
(0.601)
-1.295*
(0.709)
1.561**
(0.629)
-0.328
(0.313)

-0.230
(0.198)
-0.270
(0.177)
1.319***
(0.311)
-0.244***
(0.073)
0.367**
(0.146)
-0.443**
(0.184)

0.058
(0.846)

0.492
(0.582)

1.312
(0.940)

0.388
(0.674)

-0.189
(0.404)

0.329
(0.612)

0.517
(0.813)

0.272
(0.720)

-0.162
(0.190)
-0.106
(0.480)
-0.371
(0.350)
0.526**
(0.222)
-0.014
(0.177)
-0.080
(0.533)

-0.092
(0.209)
-0.239
(0.323)
0.008
(0.230)
-0.052
(0.080)
-0.194*
(0.114)
0.059
(0.285)

-0.103
(0.328)
-1.032**
(0.493)
-0.210
(0.427)
1.084*
(0.569)
-0.551
(0.444)
-0.658
(0.584)

0.022
(0.265)
-0.533
(0.424)
-0.181
(0.308)
0.205
(0.187)
-0.025
(0.212)
0.035
(0.318)

0.258
(0.190)
-0.026
(0.272)
-1.255***
(0.335)
0.460***
(0.089)
-0.243
(0.248)
0.374
(0.291)

0.131
(0.213)
-0.306
(0.350)
-0.526***
(0.186)
0.016
(0.068)
-0.438***
(0.113)
0.375
(0.322)

0.480
(0.321)
-0.562
(0.450)
-1.719***
(0.613)
1.307*
(0.734)
-1.466**
(0.691)
0.093
(0.456)

0.228
(0.279)
-0.440
(0.615)
-0.964***
(0.364)
0.219***
(0.078)
-0.217
(0.200)
0.225
(0.326)

0.222***
(0.071)
1,539
0.301
7.415
0.284

0.266***
(0.047)
1,539
0.321
5.606
0.469

0.269**
(0.110)
1,539
0.255
8.033
0.236

0.239***
(0.091)
1,539
0.293
7.591
0.270

0.151*
(0.079)
1,650
0.213
10.31
0.112

0.138***
(0.029)
1,650
0.353
5.299
0.506

0.104
(0.087)
1,650
0.107
7.552
0.273

0.108
(0.078)
1,650
0.286
5.138
0.526

40