The effect of financial distress on capital structure: The case of Brazilian banks

Douglas da Rosa München

The Quarterly Review of Economics and Finance, 2022, vol. 86, issue C, 296-304

Abstract: This study investigates the effect of financial distress on capital structure, considering banking performance variables and the economic environment. The analysis is based on balanced panel data for Brazilian listed banks, using accounting and non-accounting information on a quarterly basis from September 2009 to December 2016. This study uncovers evidence that the effect of financial distress on capital structure is context-dependent. During normal times, the findings support the argument for higher bank capital in times of financial distress. However, in periods of economic recession, the effect of bank distress on capital was found to be negative, indicating that the impact of banks’ risk on capital is especially important during such periods of market uncertainty. The findings are robust to alternative estimation methods and to alternative measures of risk. This study provides insights for the design of prudent regulation and the supervision of banks, especially for emerging markets economies, considering their highly uncertain environment with widely varying rates of growth and inflation.

Keywords: Leverage; Banks; Regulation; Risk; Financial distress; Brazil (search for similar items in EconPapers)
JEL-codes: G20 G21 G28 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1062976922000874
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:86:y:2022:i:c:p:296-304

DOI: 10.1016/j.qref.2022.07.010

Access Statistics for this article

The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty

More articles in The Quarterly Review of Economics and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().