Determinates of Capital Structure in Case of Private Commercial Banks in Ethiopia

Tamiru Anley Alebachew

doi:doi:10.11648/j.jfa.20200805.13

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Determinates of Capital Structure in Case of Private Commercial Banks in Ethiopia

Tamiru Anley Alebachew

Published in Journal of Finance and Accounting (Volume 8, Issue 5)

Received: 10 August 2020 Accepted: 24 August 2020 Published: 24 September 2020

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Abstract

This study was conducted on the title determinants of capital structure; evidence from private commercial banks in Ethiopia. To find out what determines capital structure, seven bank specific explanatory variables (Profitability, tangibility, growth, age, tax shield, size and liquidity) was selected and regressed beside the suitable capital structure measure (Debt to Equity Ratio). Fourteen private commercial banks, which had minimum of seven years life were selected for the study. Their audited financial statement from 2013 to 2019 was used as major source of data. Before the analysis of regression model test of CLRM assumptions such as normality, multicollinearity, heteroscedastcity and autocorrelation tests were conducted on the data. After these tests, Hauseman model specification test conducted and its result indicated that Fixed Effect Model was better to test hypotheses that emerge through the review of existing literature. Then inferential statistics regression was done by Fixed Effect Model (FEM). The regression result reveled that profitability, age, tax shield and size had significant effect on leverage. However, among the hypothesized capital structure determinants growth, asset tangibility and liquidity had insignificant effect on capital structure of Ethiopian private commercial bank. In addition, trade-off theory and the pecking order theory explained the capital structure behavior of banking industry in Ethiopia.

Published in	Journal of Finance and Accounting (Volume 8, Issue 5)
DOI	10.11648/j.jfa.20200805.13
Page(s)	221-229
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2020. Published by Science Publishing Group

Keywords

Capital Structure (Leverage), FEM, Trade-off Theory, Packing Order Theory, Private Commercial Bank

References

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APA Style

Tamiru Anley Alebachew. (2020). Determinates of Capital Structure in Case of Private Commercial Banks in Ethiopia. Journal of Finance and Accounting, 8(5), 221-229. https://doi.org/10.11648/j.jfa.20200805.13

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Tamiru Anley Alebachew. Determinates of Capital Structure in Case of Private Commercial Banks in Ethiopia. J. Finance Account. 2020, 8(5), 221-229. doi: 10.11648/j.jfa.20200805.13

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AMA Style

Tamiru Anley Alebachew. Determinates of Capital Structure in Case of Private Commercial Banks in Ethiopia. J Finance Account. 2020;8(5):221-229. doi: 10.11648/j.jfa.20200805.13

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@article{10.11648/j.jfa.20200805.13,
  author = {Tamiru Anley Alebachew},
  title = {Determinates of Capital Structure in Case of Private Commercial Banks in Ethiopia},
  journal = {Journal of Finance and Accounting},
  volume = {8},
  number = {5},
  pages = {221-229},
  doi = {10.11648/j.jfa.20200805.13},
  url = {https://doi.org/10.11648/j.jfa.20200805.13},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20200805.13},
  abstract = {This study was conducted on the title determinants of capital structure; evidence from private commercial banks in Ethiopia. To find out what determines capital structure, seven bank specific explanatory variables (Profitability, tangibility, growth, age, tax shield, size and liquidity) was selected and regressed beside the suitable capital structure measure (Debt to Equity Ratio). Fourteen private commercial banks, which had minimum of seven years life were selected for the study. Their audited financial statement from 2013 to 2019 was used as major source of data. Before the analysis of regression model test of CLRM assumptions such as normality, multicollinearity, heteroscedastcity and autocorrelation tests were conducted on the data. After these tests, Hauseman model specification test conducted and its result indicated that Fixed Effect Model was better to test hypotheses that emerge through the review of existing literature. Then inferential statistics regression was done by Fixed Effect Model (FEM). The regression result reveled that profitability, age, tax shield and size had significant effect on leverage. However, among the hypothesized capital structure determinants growth, asset tangibility and liquidity had insignificant effect on capital structure of Ethiopian private commercial bank. In addition, trade-off theory and the pecking order theory explained the capital structure behavior of banking industry in Ethiopia.},
 year = {2020}
}

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TY  - JOUR
T1  - Determinates of Capital Structure in Case of Private Commercial Banks in Ethiopia
AU  - Tamiru Anley Alebachew
Y1  - 2020/09/24
PY  - 2020
N1  - https://doi.org/10.11648/j.jfa.20200805.13
DO  - 10.11648/j.jfa.20200805.13
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 221
EP  - 229
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20200805.13
AB  - This study was conducted on the title determinants of capital structure; evidence from private commercial banks in Ethiopia. To find out what determines capital structure, seven bank specific explanatory variables (Profitability, tangibility, growth, age, tax shield, size and liquidity) was selected and regressed beside the suitable capital structure measure (Debt to Equity Ratio). Fourteen private commercial banks, which had minimum of seven years life were selected for the study. Their audited financial statement from 2013 to 2019 was used as major source of data. Before the analysis of regression model test of CLRM assumptions such as normality, multicollinearity, heteroscedastcity and autocorrelation tests were conducted on the data. After these tests, Hauseman model specification test conducted and its result indicated that Fixed Effect Model was better to test hypotheses that emerge through the review of existing literature. Then inferential statistics regression was done by Fixed Effect Model (FEM). The regression result reveled that profitability, age, tax shield and size had significant effect on leverage. However, among the hypothesized capital structure determinants growth, asset tangibility and liquidity had insignificant effect on capital structure of Ethiopian private commercial bank. In addition, trade-off theory and the pecking order theory explained the capital structure behavior of banking industry in Ethiopia.
VL  - 8
IS  - 5
ER  -

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Author Information

Tamiru Anley Alebachew

Department of Accounting and Finance, Mekdela Amba University, Mekane Selam, Ethiopia

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Tamiru Anley Alebachew. (2020). Determinates of Capital Structure in Case of Private Commercial Banks in Ethiopia. Journal of Finance and Accounting, 8(5), 221-229. https://doi.org/10.11648/j.jfa.20200805.13

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Tamiru Anley Alebachew. Determinates of Capital Structure in Case of Private Commercial Banks in Ethiopia. J. Finance Account. 2020, 8(5), 221-229. doi: 10.11648/j.jfa.20200805.13

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AMA Style

Tamiru Anley Alebachew. Determinates of Capital Structure in Case of Private Commercial Banks in Ethiopia. J Finance Account. 2020;8(5):221-229. doi: 10.11648/j.jfa.20200805.13

Copy | Download

@article{10.11648/j.jfa.20200805.13,
  author = {Tamiru Anley Alebachew},
  title = {Determinates of Capital Structure in Case of Private Commercial Banks in Ethiopia},
  journal = {Journal of Finance and Accounting},
  volume = {8},
  number = {5},
  pages = {221-229},
  doi = {10.11648/j.jfa.20200805.13},
  url = {https://doi.org/10.11648/j.jfa.20200805.13},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20200805.13},
  abstract = {This study was conducted on the title determinants of capital structure; evidence from private commercial banks in Ethiopia. To find out what determines capital structure, seven bank specific explanatory variables (Profitability, tangibility, growth, age, tax shield, size and liquidity) was selected and regressed beside the suitable capital structure measure (Debt to Equity Ratio). Fourteen private commercial banks, which had minimum of seven years life were selected for the study. Their audited financial statement from 2013 to 2019 was used as major source of data. Before the analysis of regression model test of CLRM assumptions such as normality, multicollinearity, heteroscedastcity and autocorrelation tests were conducted on the data. After these tests, Hauseman model specification test conducted and its result indicated that Fixed Effect Model was better to test hypotheses that emerge through the review of existing literature. Then inferential statistics regression was done by Fixed Effect Model (FEM). The regression result reveled that profitability, age, tax shield and size had significant effect on leverage. However, among the hypothesized capital structure determinants growth, asset tangibility and liquidity had insignificant effect on capital structure of Ethiopian private commercial bank. In addition, trade-off theory and the pecking order theory explained the capital structure behavior of banking industry in Ethiopia.},
 year = {2020}
}

Copy | Download

TY  - JOUR
T1  - Determinates of Capital Structure in Case of Private Commercial Banks in Ethiopia
AU  - Tamiru Anley Alebachew
Y1  - 2020/09/24
PY  - 2020
N1  - https://doi.org/10.11648/j.jfa.20200805.13
DO  - 10.11648/j.jfa.20200805.13
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 221
EP  - 229
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20200805.13
AB  - This study was conducted on the title determinants of capital structure; evidence from private commercial banks in Ethiopia. To find out what determines capital structure, seven bank specific explanatory variables (Profitability, tangibility, growth, age, tax shield, size and liquidity) was selected and regressed beside the suitable capital structure measure (Debt to Equity Ratio). Fourteen private commercial banks, which had minimum of seven years life were selected for the study. Their audited financial statement from 2013 to 2019 was used as major source of data. Before the analysis of regression model test of CLRM assumptions such as normality, multicollinearity, heteroscedastcity and autocorrelation tests were conducted on the data. After these tests, Hauseman model specification test conducted and its result indicated that Fixed Effect Model was better to test hypotheses that emerge through the review of existing literature. Then inferential statistics regression was done by Fixed Effect Model (FEM). The regression result reveled that profitability, age, tax shield and size had significant effect on leverage. However, among the hypothesized capital structure determinants growth, asset tangibility and liquidity had insignificant effect on capital structure of Ethiopian private commercial bank. In addition, trade-off theory and the pecking order theory explained the capital structure behavior of banking industry in Ethiopia.
VL  - 8
IS  - 5
ER  -

Copy | Download