The Effect of Ownership Concentration on the Capital Adequacy of Banks

Zahra Esmaeili , Zekvan Imani, Ali Homayoon

Abstract


Capital adequacy ratio is one of the basic criteria in assessing the financial condition of the banks. The ratio is affected by changes in other financial variables of bank. On the contrary, it can affect these variables and thus the overall behavior of the bank. The aim of this study is to investigate the effect of ownership concentration on capital adequacy and liquidity in banks. For this purpose, the required data are extracted from the audited financial statements of banks for the period 2007 to 2014. This research is a correlation and the main method of statistical test is regression analysis. Logit regression technique is used for the research hypotheses. The results of testing the research hypotheses show that there is a significant negative relationship between the concentration of ownership and capital adequacy of banks. Concentration of ownership increases the probability of being placed in the classification of banks with lack of capital adequacy. In other words, ownership concentration reduces the capital adequacy.

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