Basel III regulations and financing decisions of nonfinancial firms the South African evidence

Tesfaye T Lemma, Michael Machokoto and Tendai Gwatidzo

No 11067, Working Papers from South African Reserve Bank

Abstract: This study examines the impact of the Basel III regulatory framework on financing decisions within South Africas real sector. Using a sample of 2 045 firm-year observations spanning the years 20112015 and employing the difference-in-differences approach, we find a significant decrease in debt financing and debt maturity for firms deemed constrained relative to unconstrained firms in the post-Basel III implementation period. Further analyses suggest that the Basel III regulatory framework has a persistent effect on financing decisions in the real sector. Our findings indicate that the Basel III regulatory framework reduces leverage and debt maturity, especially for constrained firms.

Date: 2024-10-14
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