Analysis of the Capital Structure of the Main Banking Systems in Central America in the 2015–2019 period
Abstract
This study aims to identify the determinants of the capital structure of the banking systems in El Salvador, Guatemala, and Panama in the 2015–2019 period. For that purpose, the authors analyzed 68 financial institutions that monthly report their financial statements to local banking divisions. The mixed-methods approach adopted here included an extensive literature review to compile theoretical and empirical studies about the main postulates related to this topic. In addition, a quantitative approach was used to analyze the evolution of each banking system and the behavior of its capital structure. Hence, the data were described, and an econometric technique was employed to develop a static panel data model with fixed effects. The results obtained show that the traditional determinants that explain the capital structure of non-financial firms are significant in the banking context as well. Furthermore, the relationship between said determinants and debt capacity agrees with the pecking order theory.
References
Aggarwal, R., & Kyaw, N. A. (2010). Capital structure, dividend policy, and multinationality: Theory versus empirical evidence. International Review of Financial Analysis, v. 19, n. 2, 140-150. https://doi.org/10.1016/j.irfa.2010.01.001
Alarcón Pérez, Ó. A. (2017). Teoría del Pecking Order: ¿Aplicación en Colombia?, una revisión bibliográfica, Criterio Libre, v. 15, n. 27, 139-154. https://dialnet.unirioja.es/servlet/articulo?codigo=6676016
Antoniou, A., Guney, Y., Paudyal, K. (2008). The Determinants of Capital Structure: Capital Market-Oriented versus Bank-Oriented Institutions. Journal of Financial And Quantitive Analysis, v. 43, n. 1, 59-92. https://doi.org/10.1017/S0022109000002751
Athanasoglou, P. P., Brissimis, S. N., & Delis, M. D. (2008). Bank-specific, industry-specific and macroeconomic determinants of bank profitability. Journal of international financial Markets, Institutions and Money, v. 18, n. 2, 121-136. https://doi.org/10.1016/j.intfin.2006.07.001
Barclay, M. J., Smith Jr, C. W., Morellec, E. (2006). On the debt capacity of growth options. The Journal of Business, v. 79, n, 1, 37-60. https://doi.org/10.1086/497404
Beck, N., Katz, J. N. (1995). What To Do (and Not to Do) with Time-Series Cross-Section Data. American Political Science Review, v. 89, n. 3, 634-647. https://doi.org/10.2307/2082979
Beck, T., Demirgüç-Kunt, A., Maksimovic, V. (2008). Financing patterns around the world: Are small firms different?. Journal of financial economics, v. 89, n. 3, 467-487. https://doi.org/10.1016/j.jfineco.2007.10.005
Beck, T., Levine, R., Loayza, N. (2000). Finance and the sources of growth. Journal of Financial Economics, v. 58, n. 1-2, 261-300. https://doi.org/10.1016/S0304-405X(00)00072-6
Booth, L., Aivazian, V., Demirguc‐Kunt, A., Maksimovic, V. (2001). Capital structures in developing countries. The journal of finance, v. 56, n. 1, 87-130. https://doi.org/10.1111/0022-1082.00320
Bradley, M., Jarrell, G. A., Kim, E. H. (1984). On the Existence of an Optimal Capital Structure : Theory and Evidence. The Journal of Finance, v. 39, n. 3, 857-878. https://doi.org/10.2307/2327950
Breusch, T. S., and A. R. Pagan. (1980). The Lagrange multiplier test and its applications to model specification in econometrics. Review of Economic Studies, v. 47, n. 1, 239-253. https://doi.org/10.2307/2297111
Daskalakis, N., Psillaki, M. (2007). Do country or firm factors explain capital structure? Evidence from SMEs in France and Greece. Applied financial economics, v. 18, n. 2, 87-97. https://doi.org/10.1080/09603100601018864
Demirgüç-Kunt, A., Maksimovic, V. (1999). Institutions, financial markets, and firm debt maturity. Journal of financial economics, v. 54, n. 3, 295-336. https://doi.org/10.1016/S0304-405X(99)00039-2
Diamond, D. W., Rajan, R. G. (2000). A theory of bank capital. The Journal of Finance, v. 55, n. 6, 2431-2465. https://doi.org/10.1111/0022-1082.00296
Durán Díaz, I. A. (2005). Determinantes de la estructura de capital de los establecimientos de crédito en Colombia: 1992-2003, Ecos De Economía: Revista Latinoamericana de Economía Aplicada, v. 9, n. 21, 27-60. https://publicaciones.eafit.edu.co/index.php/ecos-economia/article/view/1966
Fama, E. F., French, K. R. (2002). Testing trade-off and Pecking Order predictions about dividends and debt. The review of financial studies, v. 15, n. 1, 1-33. https://doi.org/10.1093/rfs/15.1.1
Fan, J. P. H., Titman, S., Twite, G. (2012). An international comparison of capital structure and debt maturity choices. Journal of Financial and quantitative Analysis, v. 47, n. 1, 23-56. https://doi.org/10.1017/S0022109011000597
Flannery, M. J. (1994). Debt Maturity and the Deadweight Cost of Leverage: Optimally Financing Banking Firm, The American Economic Review, v. 84, n. 1, 320-331. https://www.jstor.org/stable/2117987
Flannery, M. J., Rangan, K. P. (2006). Partial adjustment toward target capital structures. Journal of financial economics, v. 79, n. 3, 469-506. https://doi.org/10.1016/j.jfineco.2005.03.004
Frank, M. Z., Goyal, V. K. (2003). Testing the Pecking Order theory of capital structure. Journal of financial economics, v. 67, n. 2, 217-248. https://doi.org/10.1016/S0304-405X(02)00252-0
Frank, M. Z., Goyal, V. K. (2009). Capital Structure Decisions : Which Factors Are Reliably Important ? Financial Management, v. 38, n. 1, 1-37. https://doi.org/10.1111/j.1755-053X.2009.01026.x
Gaud, P., Jani, E., Hoesli, M., & Bender, A. (2005). The capital structure of Swiss companies: an empirical analysis using dynamic panel data. European financial management, v. 11, n.1, 51-69. https://doi.org/10.1111/j.1354-7798.2005.00275.x
Goyal, V. K., Lehn, K., Racic, S. (2002). Growth opportunities and corporate debt policy: the case of the US defense industry. Journal of financial economics, v. 64, n. 1, 35-59. https://doi.org/10.1016/S0304-405X(02)00070-3
Greene, W. H. (2000). Econometric Analysis. 4th Prentice Hall. Upper Saddle River.
Greenbaum, S. I., Thakor, A. V., Boot, A. W. A. (2015). Chapter 13: Bank Capital Structure. In Contemporary Financial Intermediation, ed. 3, 317-327. Elsevier Inc. https://doi.org/10.1016/B978-0-12-405196-6.00013-6
Gropp, R., Heider, F. (2010). The determinants of bank capital structure. Review of Finance, v. 14, n. 4, 587-622. https://doi.org/10.1093/rof/rfp030
Gutiérrez Ponce, H., Morán Montalvo, C., Posas Murillo, R. (2019). Determinantes de la estructura de capital : un estudio empírico del sector manufacturero en Ecuador. Contaduría y Administración, v. 64, n. 2, 1-18. https://doi.org/10.22201/fca.24488410e.2018.1848
Hall, G. C., Hutchinson, P. J., Michaelas, N. (2004). Determinants of the capital structures of European SMEs. Journal of Business Finance & Accounting, v. 31, n. 5‐6, 711-728. https://doi.org/10.1111/j.0306-686X.2004.00554.x
Haron, R., Nomran, N. M., Othman, A. H. A., Husin, M. M., Sharofiddin, A. (2021). The influence of firm, industry and concentrated ownership on dynamic capital structure decision in emerging market. Journal of Asia Business Studies, v. 15, n. 5, 689-709. https://doi.org/10.1108/JABS-04-2019-0109
Jensen, M. C., Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, v. 3, n. 4, 305-360. https://doi.org/10.1016/0304-405X(76)90026-X
Kenourgios, D., Savvakis, G. A., Papageorgiou, T. (2019). The capital structure dynamics of European listed SMEs. Journal of Small Business & Entrepreneurship, v. 32, n. 6, 567-584. https://doi.org/10.1080/08276331.2019.1603946
Leland, H. E.,Toft, K. B. (1996). Optimal Capital Structure , Endogenous Bankruptcy , and the Term Structure of Credit Spreads. The Journal of Finance, v. 51, n. 3, 987-1019. https://doi.org/10.2307/2329229
Levin, A., Lin, C. F., Chu, C. S. J. (2002). Unit root tests in panel data: asymptotic and finite-sample properties. Journal of econometrics, v. 108, n. 1, 1-24. https://doi.org/10.1016/S0304-4076(01)00098-7
Marcus, A. J. (1983). The bank capital decision: A time series—Cross section analysis. The Journal of Finance, v. 38, n. 4, 1217-1232. https://doi.org/10.1111/j.1540-6261.1983.tb02292.x
Mejía Amaya, A. F. (2013). La estructura de capital en la empresa: su estudio contemporáneo. Finanzas y Política Económica, v. 5, n. 2, 141-160. https://doi.org/10.14718/revfinanzpolitecon.v5.n2.2013.446
Miller, M. H. (1977). Debt and Taxes. The Journal of Finance, v. 32, n. 2, 261-275. https://doi.org/10.1111/j.1540-6261.1977.tb03267.x
Modigliani, F., Miller, M. H. (1958). The Cost of Capital , Corporation Finance and the Theory of Investment, The American Economic Review, v. 48, n. 3, 261-297. https://www.jstor.org/stable/1809766
Modigliani, F., Miller, M. H. (1963). Corporate Income Taxes and the Cost of Capital: A Correction, The American Economic Review, v. 53, n. 3, 433-443. https://www.jstor.org/stable/1809167
Mondragón-Hernández, S. A. (2011). Marco conceptual de las teorías de la irrelevancia , del trade-off y de la jerarquía de las preferencias [Tesis de maestría, Universidad Nacional de Colombia].
https://expeditiorepositorio.utadeo.edu.co/handle/20.500.12010/10254
Myers, S. C. (1984). The Capital Structure Puzzle. The Journal of Finance, v. 39, n. 3, 575-592. https://doi.org/10.2307/2327916
Myers, S. C. (2001). Capital structure. Journal of Economic Perspectives, v. 15, n. 2, 81-102. https://doi.org/10.1257/jep.15.2.81
Myers, S. C., Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, v. 13, n. 2, 187-221. https://doi.org/10.1016/0304-405X(84)90023-0
Qiu, M. and La, B., 2010. Firm characteristics as determinants of capital structures in Australia. International Journal of the Economics of Business, v. 17, n. 3, 277-287. https://doi.org/10.1080/13571516.2010.513810
Rajan, R. G., Zingales, L. (1995). What Do We Know about Capital Structure? Some Evidence from International Data. The Journal of Finance, v. 50, n. 5, 1421-1460. https://doi.org/10.1111/j.1540-6261.1995.tb05184.x
Rivera Godoy, J. A. (2002). Teoría sobre la Estructura de Capital, Estudios Gerenciales, n. 84, 31-60. https://www.icesi.edu.co/revistas/index.php/estudios_gerenciales/article/view/93
Roberts, M. R. (2002). The dynamics of capital structure: An empirical analysis of a partially observable system. Duke University, Fuqua School of Business Working Paper. https://dx.doi.org/10.2139/ssrn.305885
Santomero, A. M., Babbel, D. F. (1997). Financial Risk Management by Insurers: An Analysis of the Process. The Journal of Risk and Insurance, v. 64, n. 2, 231-270. https://doi.org/10.2307/253730
Saona, P. (2016). Intra- and extra-bank determinants of Latin American Banks’ profitability. International Review of Economics & Finance, v. 45, 197-214. https://doi.org/10.1016/j.iref.2016.06.004
Sayilgan, G., Karabacak, H., & Kucukkocaoglu, G. (2006). The firm-specific determinants of corporate capital structure: Evidence from Turkish panel data. Investment Management and Financial Innovations, v. 3, n. 3, 125-139. http://baskent.edu.tr/~gurayk/kisiselcapstrpaper.pdf
Shahzad, A., Azeem, M., Nazir, M. S., Vo, X. V., Linh, N. T. M. (2021). The determinants of capital structure: Evidence from SAARC countries. International Journal of Finance & Economics, v. 26, n. 4, 6471-6487. https://doi.org/10.1002/ijfe.2132
Shyam-Sunder, L., Myers, S. C. (1999). Testing static tradeoff against Pecking Order models of capital structure. Journal of financial economics, v. 51, n. 2, 219-244. https://doi.org/10.1016/S0304-405X(98)00051-8
Sibindi, A. B., Makina, D. (2018). Are the determinants of banks ’ and insurers ’ capital structures homogeneous? Evidence using South African data. Cogent Economics & Finance, v. 6, n. 1, 1-21. https://doi.org/10.1080/23322039.2018.1519899
Torres-Reyna, O. (2007). Panel Data Analysis Fixed and Random Effects using Stata (v. 4.2). https://www.princeton.edu/~otorres/Panel101.pdf
Warner, J. B. (1977). Bankruptcy Costs : Some Evidence. The Journal of Finance, v. 32, n. 2, 337-347. https://doi.org/10.2307/2326766
Wooldridge, J. M. (2002). Econometric analysis of cross section and panel data MIT press, v. 108, n. 2, 245-254. Cambridge, MA.
Zambrano Vargas, S. M., Acuña Corredor, G. A. (2011). Estructura de capital. Evolución teórica. Criterio Libre, v. 9, n. 15, 81-102. https://revistas.unilibre.edu.co/index.php/criteriolibre/article/view/1203
Downloads
Copyright (c) 2022 Juan David Gonzalez Ruiz, Michael Ramirez, Eduardo Duque
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.