Capital structure and performance of Middle East and North Africa (MENA) banks: an assessment of credit rating

Research output: Contribution to journalArticle

Abstract

The firm’s credit rating is an important communication tool and previous research has shown that many companies consider it important in capital structure decisions. This study examines the determinants of capital structure in MENA banks. In addition, it investigates the determinants of credit rating. Further, the impact of credit rating and capital structure on banks’ performance is examined. Therefore, this study is an attempt to answer the following questions: 1) what are the main determinants of capital structure? 2) how does credit rating affect capital structure? 3) what are the main determinants of credit rating? and 4) what is the effect of capital structure and credit rating on bank performance? The sample covers 169 banks and is divided into two sub-samples: rated (79) and non-rated banks (90). The results indicate that credit rating directly affects the capital structure decisions as rated banks use more debts than non-rated banks. Banks’ performance is positively associated with credit rating and negatively with the capital structure. This study has an implication on investors in their decisions to invest in the banking industry. It also helpful for policy makers to understand how bank’s capital structure behaves so they could take it into consideration when issuing new regulations such as Basel.
Original languageEnglish
Pages (from-to)77-91
Number of pages15
JournalBanks and Bank Systems
Volume11
Issue number1
DOIs
Publication statusPublished - 25 Apr 2016
Externally publishedYes

Bibliographical note

Open access journal, CC BY-NC

Keywords

  • capital structure
  • credit rating
  • profitability
  • MENA banks

Fingerprint Dive into the research topics of 'Capital structure and performance of Middle East and North Africa (MENA) banks: an assessment of credit rating'. Together they form a unique fingerprint.

  • Cite this