How Do Banks Set their Capital?

Ali Awdeh () and Hassan Hamadi

MPRA Paper from University Library of Munich, Germany

Abstract: We have analysed the determinants of capital for banks operating in the Lebanese market between 1994 and 2008. We firstly found that the subsidiaries of foreign banks hold significantly lower capital than their domestic counterparties and the institutional ownership has a productive impact on domestic bank capital. Secondly, the capital of domestic banks is shaped differently from that of foreign banks. For instance, the host market capital regulation is more binding for domestic banks than foreign banks. Besides, domestic banks use their capitalization level to signal, unlike foreign banks that rely on their reputation. Finally, regarding the cyclicality of bank capital, this only applies for domestic banks, whereas foreign bank capital does not follow the economic cycle of the host market.

Keywords: Bank capital; Capital requirements; Foreign banks. (search for similar items in EconPapers)
JEL-codes: G21 G32 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published in Journal of Money, Investment and Banking 21 (2011): pp. 88-105

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/119116/1/MPRA_paper_119116.pdf original version (application/pdf)

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:pra:mprapa:119116

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().