Capital Structure Determinant’s of North American Banks and the Compensation Executive Program-An Empiric Study on the Actual Systemic Crisis

Michele Nascimento Jucá, Almir Ferreira de Sousa, Albert Fishlow

Abstract


The works related to the capital structure of banks consider the requirements for minimum regulatory capital,
established by the Basel agreements, as their key determinant. However, recent studies suggest that standard
determinants of non-financial institutions – size, profitability, growth opportunity, tangible assets and payment of
dividends, also have the power of explaining the leveraging level of banks. Thus, this work was aimed at
checking whether, for those banks that hold own capital above the minimum regulatory value, the predictive
capacity of standard determinants also applies to American banks that have business portfolio. As an original
contribution, the work evaluated the role of the compensation program for executive managers in order to
determine the capital structure of banks. The final sample was comprised by 30 banks, which observations refer
to the period before (2003 to 2006) and during (2007 to 2010) the systemic crisis. The dynamic regression model
with panel data confirmed the key assumption mentioned by means of the significance of the independent
variables profitability and growth opportunity. At last, the variable of compensation program for executive
managers has been evidenced as significant in the definition of bank leveraging, but with sign opposite to the
expected one by the finance theory.


Full Text: PDF DOI: 10.5539/ijbm.v7n17p13

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International Journal of Business and Management   ISSN 1833-3850 (Print)   ISSN 1833-8119 (Online)

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