| Title : | Determinants of capital structure in selected Nepalese bank | | Material Type: | printed text | | Authors: | Subin Shrestha, Author | | Publication Date: | 2013 | | Pagination: | 87p. | | Size: | GRP/Thesis | | Accompanying material: | 1/B | | General note: | Including bibliography | | Languages : | English | | Descriptors: | Banks
Banks and banking
Capital management
Capital structure
Commercial banks
Nepal
| | Keywords: | 'capital management capital structure banks banks and banking commercial banks nepal | | Class number: | 658.152 | | Abstract: | The capital structure decision is crucial for any business organization. The decision is important because of the need to maximize returns to various organizational constituencies, and also because of the impact such a decision has on a firm’s ability to deal with its competitive environment (Mayers S.C., 1984). The capital structure of a firm is actually a mix of different securities. In general, a firm can choose among many alternative capital structures. It can issue a large amount of debt or very little debt. It can arrange lease financing, use warrants, issue convertible bonds, sign forward contracts or trade bond swaps. It can issue dozens of distinct securities in countless combinations; however, it attempts to find the particular combination that maximizes its overall market value.The main objective of this study is to analyze the determinants of capital structure adopted by the Nepalese bank. The specific objectives are to find out the major determinants of capital structure of banks in Nepal, to examine the relationship between financial leverage and size of the company, profitability, asset structure and level of economic growth, to analyze the variation of capital structure mix across different banks, to study the views of Managers and Executives regarding the determinants of capital structure.
The review of literature shows the sophisticated and the most contentious theories of capital structure were developed. Empirical studies took turn to the cross-sectional characteristics of individual firm’s capital structure particularly in fundamental determinants of financial structure during the period of 1970’s. After the development of agency cost and asymmetric information models of capital structure theory, most the empirical studies carried out after 1970’s are based on either agency cost model or an asymmetric information model. Finally, on the basis of the review of empirical works done so far, it can be concluded that the theories of capital structure are still not immunized against the dispute on what factors would guide the management to determine the proper capitals structure of the firms. In this study, some specific factors that determine the capital structure of Nepalese firms are examined.
The study is based on pooled data of 12 sample banks, the study sample period is from 2001 to 2012. This study employed regression analysis, correlation analysis, and portfolio analysis to explain variation in capital structure. Besides, the study also used descriptive statistics to analyze the views of the financial executives, which mainly focus on the qualitative part of the major expected return in the Nepalese stock market. The primary data have been collected through the questionnaire distributed to the senior branch manager, branch managers, management trainee, and junior officer of 12 sample banks.
The study also concluded that, on one way sorting of portfolio analysis, there exist a positive relationship between profitability and financial leverage. Similarly, the relationship between size and financial leverage is also positive, this indicates that as the profitability and size increases the financial leverage also increases. Further, the one way sorting of portfolio analysis by asset structure and level of economic growth also found to be positively related with financial leverage. In multiple regression analysis, profitability and asset structure found to be significant factor affecting financial leverage. whereas, size and level of economic growth do not have any power in explaining financial leverage ratio. The overall model is significant at 5% level of significance. The adjusted R square 0.68, indicates that 68% of variation are captured by the independent variables (profitability, size, asset structure, and level of economic growth).
The capital structure of banks is, however, still a relatively under-explored area in the banking literature. Currently, there is no clear understanding on how banks choose their capital structure and what factors influence their corporate financing behavior. This study focuses on profitability, size , asset structure and level of economic growth. It is assumed that this study is probably the new concept to do research and compare and critically analyzed findings and conclusions as to previous study which were undertaken in developed countries. It is very much required to study in the context of Nepal, whether the profitability, size, asset structure and level of economic growth explains the variation on financial leverage.
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Determinants of capital structure in selected Nepalese bank [printed text] / Subin Shrestha, Author . - 2013 . - 87p. ; GRP/Thesis + 1/B. Including bibliography Languages : English | Descriptors: | Banks
Banks and banking
Capital management
Capital structure
Commercial banks
Nepal
| | Keywords: | 'capital management capital structure banks banks and banking commercial banks nepal | | Class number: | 658.152 | | Abstract: | The capital structure decision is crucial for any business organization. The decision is important because of the need to maximize returns to various organizational constituencies, and also because of the impact such a decision has on a firm’s ability to deal with its competitive environment (Mayers S.C., 1984). The capital structure of a firm is actually a mix of different securities. In general, a firm can choose among many alternative capital structures. It can issue a large amount of debt or very little debt. It can arrange lease financing, use warrants, issue convertible bonds, sign forward contracts or trade bond swaps. It can issue dozens of distinct securities in countless combinations; however, it attempts to find the particular combination that maximizes its overall market value.The main objective of this study is to analyze the determinants of capital structure adopted by the Nepalese bank. The specific objectives are to find out the major determinants of capital structure of banks in Nepal, to examine the relationship between financial leverage and size of the company, profitability, asset structure and level of economic growth, to analyze the variation of capital structure mix across different banks, to study the views of Managers and Executives regarding the determinants of capital structure.
The review of literature shows the sophisticated and the most contentious theories of capital structure were developed. Empirical studies took turn to the cross-sectional characteristics of individual firm’s capital structure particularly in fundamental determinants of financial structure during the period of 1970’s. After the development of agency cost and asymmetric information models of capital structure theory, most the empirical studies carried out after 1970’s are based on either agency cost model or an asymmetric information model. Finally, on the basis of the review of empirical works done so far, it can be concluded that the theories of capital structure are still not immunized against the dispute on what factors would guide the management to determine the proper capitals structure of the firms. In this study, some specific factors that determine the capital structure of Nepalese firms are examined.
The study is based on pooled data of 12 sample banks, the study sample period is from 2001 to 2012. This study employed regression analysis, correlation analysis, and portfolio analysis to explain variation in capital structure. Besides, the study also used descriptive statistics to analyze the views of the financial executives, which mainly focus on the qualitative part of the major expected return in the Nepalese stock market. The primary data have been collected through the questionnaire distributed to the senior branch manager, branch managers, management trainee, and junior officer of 12 sample banks.
The study also concluded that, on one way sorting of portfolio analysis, there exist a positive relationship between profitability and financial leverage. Similarly, the relationship between size and financial leverage is also positive, this indicates that as the profitability and size increases the financial leverage also increases. Further, the one way sorting of portfolio analysis by asset structure and level of economic growth also found to be positively related with financial leverage. In multiple regression analysis, profitability and asset structure found to be significant factor affecting financial leverage. whereas, size and level of economic growth do not have any power in explaining financial leverage ratio. The overall model is significant at 5% level of significance. The adjusted R square 0.68, indicates that 68% of variation are captured by the independent variables (profitability, size, asset structure, and level of economic growth).
The capital structure of banks is, however, still a relatively under-explored area in the banking literature. Currently, there is no clear understanding on how banks choose their capital structure and what factors influence their corporate financing behavior. This study focuses on profitability, size , asset structure and level of economic growth. It is assumed that this study is probably the new concept to do research and compare and critically analyzed findings and conclusions as to previous study which were undertaken in developed countries. It is very much required to study in the context of Nepal, whether the profitability, size, asset structure and level of economic growth explains the variation on financial leverage.
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