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The Firm-Specific Determinants of Capital Structure in Public Sector and Private Sector Banks in India

The banking industry in India has undergone many phases in its history; evolving from a regulated, decentralised system in the early 1800’s, to a regulated, centralised system during British rule, to a nationalised system following India’s independence, and finally a combination of a nationalised an...

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Main Author: Garach, Jatin Bijay
Other Authors: Rajaratnam, Kanshukan
Format: Thesis
Language:English
Published: Department of Finance and Tax 2020
Subjects:
capital structure
financial firms
public sector banks
India
credit risk
capital regulations
panel data
multivariate regression modelling
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access_status_str Open Access
author Garach, Jatin Bijay
author2 Rajaratnam, Kanshukan
author_browse Garach, Jatin Bijay
Rajaratnam, Kanshukan
author_facet Rajaratnam, Kanshukan
Garach, Jatin Bijay
author_sort Garach, Jatin Bijay
collection Thesis
description The banking industry in India has undergone many phases in its history; evolving from a regulated, decentralised system in the early 1800’s, to a regulated, centralised system during British rule, to a nationalised system following India’s independence, and finally a combination of a nationalised and private system adopting global standards as it currently stands. This study has two main aims. Firstly, it will assess the relationship between the firm-specific determinants of capital structure, based on the prevailing literature, and the capital structure of public and private sector banks in India. Secondly, it will determine whether there is a difference in the firm-specific factors that contribute to the determination of the capital structure of public sector banks and private sector banks. This study adopts quantitative methods, similar to previous studies on the relationship between capital structure and its firm-specific determinants. The dependent variable, being total leverage, is regressed against multiple independent variables, being profitability, growth, firm size and credit risk (hereinafter referred to as “risk” unless otherwise indicated) in a multivariate linear regression model. This study adds to the current literature by applying the same firm-specific independent variables to the case of private and public sector banks and then to evaluate and compare the similarities and differences between the regression outputs. The results show that for private sector banks, all independent variables are statistically significant in explaining total leverage, where all the independent variables conform to the current literature on capital structure – profitability (-), firm size (-), growth (+) and credit risk (-). Conversely, for public sector banks, all independent variables were considered to be statistically significant, except for credit risk – profitability (-), firm size (+) and growth (+). These results imply that credit risk is not an important determination in a nationalised banks’ capital structure; thus, providing evidence for the moral hazard theory of public sector banks.
format Thesis
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institution University of Cape Town (South Africa)
language eng
last_indexed 2026-06-10T12:33:43.673Z
license_str Not specified — see source repository
provenance_str_mv Harvested via OAI-PMH from UCTD — University of Cape Town Open Access Repository
publishDate 2020
publishDateRange 2020
publishDateSort 2020
publisher Department of Finance and Tax
publisherStr Department of Finance and Tax
record_format dspace
source_str UCTD — University of Cape Town Open Access Repository
spelling oai:open.uct.ac.za:11427/31673 The Firm-Specific Determinants of Capital Structure in Public Sector and Private Sector Banks in India Garach, Jatin Bijay Rajaratnam, Kanshukan Modack, Goolam capital structure financial firms public sector banks India credit risk capital regulations panel data multivariate regression modelling The banking industry in India has undergone many phases in its history; evolving from a regulated, decentralised system in the early 1800’s, to a regulated, centralised system during British rule, to a nationalised system following India’s independence, and finally a combination of a nationalised and private system adopting global standards as it currently stands. This study has two main aims. Firstly, it will assess the relationship between the firm-specific determinants of capital structure, based on the prevailing literature, and the capital structure of public and private sector banks in India. Secondly, it will determine whether there is a difference in the firm-specific factors that contribute to the determination of the capital structure of public sector banks and private sector banks. This study adopts quantitative methods, similar to previous studies on the relationship between capital structure and its firm-specific determinants. The dependent variable, being total leverage, is regressed against multiple independent variables, being profitability, growth, firm size and credit risk (hereinafter referred to as “risk” unless otherwise indicated) in a multivariate linear regression model. This study adds to the current literature by applying the same firm-specific independent variables to the case of private and public sector banks and then to evaluate and compare the similarities and differences between the regression outputs. The results show that for private sector banks, all independent variables are statistically significant in explaining total leverage, where all the independent variables conform to the current literature on capital structure – profitability (-), firm size (-), growth (+) and credit risk (-). Conversely, for public sector banks, all independent variables were considered to be statistically significant, except for credit risk – profitability (-), firm size (+) and growth (+). These results imply that credit risk is not an important determination in a nationalised banks’ capital structure; thus, providing evidence for the moral hazard theory of public sector banks. 2020-04-23T07:02:58Z 2020-04-23T07:02:58Z 2019 2020-04-23T01:17:38Z Master Thesis Masters MCom https://hdl.handle.net/11427/31673 eng application/pdf Department of Finance and Tax Faculty of Commerce
spellingShingle capital structure
financial firms
public sector banks
India
credit risk
capital regulations
panel data
multivariate regression modelling
Garach, Jatin Bijay
The Firm-Specific Determinants of Capital Structure in Public Sector and Private Sector Banks in India
thesis_degree_str Master's
title The Firm-Specific Determinants of Capital Structure in Public Sector and Private Sector Banks in India
title_full The Firm-Specific Determinants of Capital Structure in Public Sector and Private Sector Banks in India
title_fullStr The Firm-Specific Determinants of Capital Structure in Public Sector and Private Sector Banks in India
title_full_unstemmed The Firm-Specific Determinants of Capital Structure in Public Sector and Private Sector Banks in India
title_short The Firm-Specific Determinants of Capital Structure in Public Sector and Private Sector Banks in India
title_sort firm specific determinants of capital structure in public sector and private sector banks in india
topic capital structure
financial firms
public sector banks
India
credit risk
capital regulations
panel data
multivariate regression modelling
url https://hdl.handle.net/11427/31673
work_keys_str_mv AT garachjatinbijay thefirmspecificdeterminantsofcapitalstructureinpublicsectorandprivatesectorbanksinindia
AT garachjatinbijay firmspecificdeterminantsofcapitalstructureinpublicsectorandprivatesectorbanksinindia

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