Determinants of Capital Structure: Evidence from Banking Sector in Albania

Abstract

The aim of this thesis is to give a general view on theoretical and empirical study of capital structure in Banking system in Albania, its components and the factors affecting the decision how to efficiently allocate the capital needed for the second level banks. There are many factors and determinants which affect the capital structuring within a bank. The question each manager should do and the approaches the analysts and researchers have done, is analyzed in this research. The most important components of capital structure are its determinants and how they affect the leverage ratio. In this paper will be introduced an econometric regression analyses about second level banks in Albania. The sample is composed of some important determinants of four biggest second level banks (BKT, Raiffeisen Bank, Intesa Sanpaolo Bank, ProCredit Bank) operating in Albania for years 2008 - 2013. Size, profitability, growth and tangibility are used as independent variables, while leverage ratio is the dependent variable. The empirical study determines if these variables are important over the capital structure and whether the independent variables are significant over the leverage ratios of the second level banks. As a result of this research findings, it is found that the main determinant factors which contribute to the bank leverage level of the Banking industry in Albania between the years 2008 to 2013 are mainly capital adequacy, tangibility, bank size and profitability with all of these factors conforming to sign expectations based on following empirical findings.