The Determinants of Banks’ Capital Structure in Cambodia: Empirical Evidence from A Highly Dollarized Economy

銀行

ドル化

カンボジア

capital structure

banks

dollarization

Cambodia

In developed countries where financial liberalization has progressed, the view that the capital structure of the banking business is determined endogenously like other non-financial companies, and that the standard corporate finance theory well explain banks’ capital structure. For developing countries, Romdhane (2012), Ukaegbu and Oino (2013), and Allen and et al. (2013) verified that corporate finance theory is valid to determine the capital structure of commercial banks in Tunisia, Kenya, and Southeast Asia. This paper is the first empirical study to examine what factors determine the capital structure of commercial banks in Cambodia, where financial activities are highly dollarized. In this paper, we conducted a regression analysis of capital ratios by using panel data on 12 major commercial banks during the 2011-2017 period. According to the tentative estimates, (1) the capital structure of Cambodian commercial banks can be generally explained by the standardized corporate finance theory, and (2) banks aiming for aggressive business expansion tend to value credit and liquidity risk low. In a dollarized economy, commercial banks must be prepared for high systemic risks at their own risk, since the last lender function of the central bank is limited. Our analysis suggests that Cambodian banks need to be fully more risk-conscious in their business activities.