Unpacking the impact of bank-specific factor interactions on capital structure

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Abstract

This study examines the joint effects of competition, efficiency, and stability on the capital asset ratio (CAR) of African commercial banks using a composite institutional measure—competition, efficiency, and stability index (CESINDEX). The analysis is based on an unbalanced panel of 792 bank-year observations from 66 commercial banks across 12 African countries. Panel estimation techniques are employed to account for heterogeneity and endogeneity. The findings indicate that CESINDEX has a positive and statistically significant effect on CAR, suggesting that stronger institutional conditions are associated with higher bank capitalization. Among the competition, efficiency, and stability components, financial stability, proxied by the Z-score, exhibits the strongest positive association with CAR, while technical efficiency and profitability display negative relationships with capital ratios. Overall, the results demonstrate that capital structure decisions in African banks are shaped by the joint interaction of competition, efficiency, and stability rather than isolated institutional effects. The study contributes to the banking and capital structure literature by providing integrated evidence from institutionally diverse and financially constrained African economies.

Keywords: Competition, Efficiency, Stability, CESINDEX

Authors’ individual contribution: Conceptualization—R.K.M.; Methodology—R.K.M.; Software—R.K.M.; Validation—S.K.; Formal Analysis—S.M.; Investigation—S.M.; Resources—S.K.; Data Curation—R.K.M.; Writing—Original Draft—R.K.M.; Writing—Review & Editing—J.M., S.K., and S.M.; Visualization—R.K.M.;
Supervision—J.M., S.K., and S.M.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: J3, J4, J5

Received: 24.05.2025
Revised: 05.09.2025; 16.01.2026; 13.04.2026
Accepted: 29.04.2026
Published online: 01.05.2026

How to cite this paper: Mauto, R. K., Marire, J., Khumalo, S., & Malumisa, S. (2026). Unpacking the impact of bank-specific factor interactions on capital structure. Risk Governance and Control: Financial Markets & Institutions, 16(2), 35–45. https://doi.org/10.22495/rgcv16i2p3