How Do Banks Determine Capital? Evidence from Germany

Authors


Address for correspondence: Volker Kleff, Ludwigstraße 12b, 61348 Bad Homburg, Germany. Tel.: +49 6172 951716; e-mail: vkleff@gmx.de

Abstract

Abstract. We analyse whether the determinants of capital found in the previous literature hold for the special German banking sector comprising three characteristic banking groups including savings banks, cooperative banks and other banks, which differ regarding their ownership and their access to the capital market. Through the use of accounting data from German banks between 1992 and 2001 we find evidence in accordance with the buffer theory of capital for all German banking groups. Furthermore, we also detect some remarkable differences between the three banking groups regarding their determination of capital due to institutional characteristics.

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