Determinants of Capital Structure in the Financial Sector: Evidence from GCC Countries

Ilker Yilmaz; Abdullah Alghazali

doi:10.31436/ijema.v32i2.1166

Authors

Ilker Yilmaz Dhofar University, Oman
Abdullah Alghazali Dhofar University, Oman

DOI:

https://doi.org/10.31436/ijema.v32i2.1166

Keywords:

Capital structure, Financing decisions, Financial sector, Banks, GCC countries

Abstract

This article aimed at investigating the determinants of capital structure in financial sector companies in six Gulf Cooperation Council (GCC) countries. By using the data of 84 companies from subsectors including banks, insurance, investment banking, and investment holding companies of the financial sector for 20 years from 2001 to 2020, making 1596 firm-year observations, we run panel data regressions for the whole sample, in country and subsector breakdowns. The results revealed that profitability has a negative relationship with leverage, while earnings volatility, tangibility, growth opportunities, and size are positively related to the whole sample. The findings are mixed in country and subsector details. The study has important implications for managers, regulators, policy makers, and academics regarding the determinants of capital structure, as well as the capital structure decisions taken by financial sector managers. To the best of our knowledge, this is the first study analyzing determinants of capital structure in the GCC context and subsector detail of financial companies.

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