The Determinants of Banks' Capital Ratio in Developing Countries: Empirical Evidence from Tunisia

Abstract

In this paper, we try to study the determinants of the banks' capital ratio in an emerging country. To do so, we model the relationships between some variables of the banks and this ratio. Our aim is to explain its high level. We try also to answer to a new question. Is it affected by the same factors in the emerging countries as in the industrialized ones?

The sample is composed of 18 banks. The data are half yearly. The period sample is from 2002 to 2008.

We find that the interest margin and the risk affect strongly the capital ratio. They explain the excess of the capital held by the Tunisian banks. So, this excess is not explained only by regulatory pressures. The deposit variability and the intermediation rate have the same sign. But, the equity cost and the deposits ratio both have a negative impact. The main determinants are the same for all the countries.

Keywords: Capital ratio, commercial bank, capital determinants, capital structure, developing countries.