Factors Affecting Capital Structure Decisions of Banks: A Systematic Literature Review Evidence from Commercial Banks of Ethiopia

Abstract

Tesfaye Eresso Gofe and Arega Seyoum Asfaw

The present systematic literature review aims to analyze the literature on factors affecting capital structure decisions of commercial banks in Ethiopia to identify the existing gaps and the level of existing research in the field and to provide direction for future research. The review was conducted using eleven relevant and available scholarly studies that were published in any time period, mainly using open search engines and databases because of the shortage of studies for the specified review and lack of access to the known database. Different key words were used to identify the articles. The Preferred Reporting Items for Systematic Reviews and Meta-Analyses (PRISMA) framework was employed to analyze the research work on capital structure decisions. The inclusion and exclusion criteria were specified in the review protocol. The descriptive analysis was performed based on different parameters to arrive at conclusions. A citation analysis was also performed to recognize impactful authors and papers. The findings revealed that most of the variables of interest explored in the studies contradicted each other and the previous literature variables. The capital structure studies were conducted by considering few variables, and most of the studies were not cited. The findings regarding the theories supported by factors affecting the capital structure decisions of commercial banks in Ethiopia were contradictory and not justified. The banking literature still doesn't cover the capital structure of banks very much. There is currently a lack of clarity regarding how banks determine their capital structure and what variables affect their corporate financing behaviour. Therefore, it is recommended that the concerned body conduct an in-depth study of the decisions banks make about their capital structure by identifying pertinent elements.

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