“Basel Accord III –Implication for the Financing Behaviour of Islamic Banks”
Abstract
Huma Ayub1
Assistant Professor, Fatima Jinnah Women University, Pakistan
Abstract
Banking regulations play an inevitable role for the stability of a country’s financial system and
economy at large. Banking regulation on capital requirements known as Basel III will have a
large effect on the world’s financial systems and economies. On the positive side, toughened
capital and liquidity requirements should make national and global financial system safer. On the
other side, enhanced safety will come at a cost, since it is expensive for banks to hold extra
capital and to be more liquid. Loans and other banking services will become more expensive and
harder to obtain which will result in slower economic growth due to higher credit costs and
reduced credit availability. Therefore, it is a great need to empirically investigate the magnitude
of these effects to measure the trade‐off in the context of Islamic banking Institutions. The study
use Panel data technique to empirically analyze the affects of Basel I and II on the financing
behavior (in terms of financing volume, spread and provisions for the non performing financing)
of Islamic banking Institutions of Pakistan. The study aims to use the inferences from empirical
investigation to provide practical implications for the Islamic banking regulators and policy
makers in the area of implementation of Basel III and its trade offs for the bank performance and
economy at large in Pakistan.
Key Terms: Basel Accord III, Lending Behavior & Islamic Banks
1 Corresponding author , huma_ayub@yahoo.com, +92333-5569913
1
1. Introduction
Basel Accord aims to enhance the quality of banking supervision in order to prevent the banking
system from future crises. In this regard Basel Committee on banking supervision (BCBS)
introduced three generations of banking regulations (Basel I, II & III). The latest generation
Basel III introduces a lot of modifications in terms of stringent capital requirements liquidity and
leverage ratios. Basel III proposed to increase the minimum common equity requirement from
2% to 4.5%. In addition, banks are required to hold a capital conservation buffer of 2.5% to
withstand future periods of stress bringing the total common equity requirements to 7%. This
reinforces the stronger definition of capital agreed by Governors and Heads of Supervision and
the higher capital requirements for trading, derivative, and securitization activities. Therefore it
seems that the Basel III will have a major impact on the business plans and the strategy of
conventional financial institutions.
Islamic finance industry represents growth of more than 15% per year of Shariah-compliant
financial services, despite the emergence of Islamic finance on the global stage, the Basel Capital
Accord makes no distinction between conventional banks and Islamic financial institutions.
Islamic banks already have stricter capital requirements than what are proposed in Basel III.
Capital structure of Islamic banks is not the same as of conventional banks who are involved in
the receipt and the payments of interest on instruments. In Islamic banks capital is composed of
essentially Tier 1 Capital (bank’s own capital) and some Tier 2. With the Islamic banks being
amongst the best capitalized on a global scale, they are on the safe side compared to their
European or US counterparts, Tier 1 and total capital requirements currently stand at 8 per cent
to 12 per cent, which are already higher than the target 2019 ratios set by Basel III.
2
Compared with conventional banks, Islamic banking industry seems to be less impacted by Basel
III as the business model is more conservative and derivatives and short selling is forbidden.
There is a possibility for Ibs to increase their international competitiveness as regards the big
impact that Basel III has in the business model of conventional banks. Islamic banks cannot
adopt Basel III without modification according to their specificities; Islamic Financial Services
Board (IFSB) should adapt Basel III regulations in order to permit to Islamic banks to adopt the
new international standards.
As far the implementation as of Basel Accord II is concerned, it is not fully adopted by the
Islamic banks globally. However, empirical evidences in the context of developed countries
show that the Basel Accord affects the banking behavior of conventional financial institutions in
terms of lending behavior. This paper aims to examine empirically the Basel I & II impact on the
financing practices (i.e financing volume, spread and provision for the non performing financing)
and to use the derived relationships for interpreting the affects of Basel III on the Islamic banks.
The remainder of this paper is organized as follows. Section 2 reviews in brief the literature on
how Basel III capital requirements affect the lending behavior of Islamic banks in terms of their
financing volume, pricing and non performing loans. Section 3 discusses the theoretical
framework and section 4 will explain methodology to assess the impact of capital requirements
of Basel III on Islamic banks' financing and non performing loan behavior. Sections 5 and 6 will
discuss the findings and conclusions, respectively.
3
2. Literature Review
2.1. Need for Basel Accord
Economic crisis of the 1970s and 1980s forced the Central Bank governors of the G-10 countries
to take pro active measures by which they could safeguard the banks from financial risk. In
response Basel Committee for Banking Supervision in 1988, introduced a capital measurement
system commonly referred to as the Basel Capital Accord (BIS 2010). The Basel Accord I& II
aims at promoting the soundness and stability of the international banking system in response to
the increased risk after the deregulation and globalization of financial systems, as well as the
accumulation of bad loans in developing countries (Kandil, 2008).
The financial crises 2007-2009 and their profound spillovers to the real sector have prompted the
Bank for International Settlements (BIS) to develop new regulations, known as Basel III. The
aim of the new regulations is to promote the resilience of the banking system and improve its
ability to absorb shocks arising from financial and economic stress. This section discuss the
nature of Basel III, its impact on the Islamic banks specifically on their financing practices in
order is to estimate the extent to which higher capital requirements of Basel III will lead to
higher loan rates and slower credit growth in Islamic banks.
2.2. Basel Accord III
Basel accord III focuses on the qualitative assessment of a minimum capital requirement that is
adequate to stand up to the risks to which a bank is exposed. It also addresses the governance and
supervisory processes that assure capital adequacy and market discipline. Basel III is
fundamentally different from Basel I and Basel II, however, because it combines micro- and
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macro-prudential reforms to address both institution-level and system-level risks. In fact, the
reforms include new macro-prudential standards that promote the buildup of capital buffers in
good times that can be drawn down in periods of stress; they also promote clear capital
conservation requirements to prevent the inappropriate distribution of capital. On the microprudential level, the Basel III reforms are especially committed to significantly increasing risk
coverage, with a focus on areas that were most problematic during the crisis trading book
exposures, counterparty credit risk, and securitization activities. These reforms represent a move
away from complex hybrid products, which did not prove to be loss absorbing in periods of
stress. The reforms also introduce a leverage ratio to serve as a backstop to the risk-based
framework; as well as global liquidity standards to address short-term and long-term liquidity
mismatches.
In terms of capital requirements, the new measures include the installation of a leverage control
that will put an upper limit to the risk a financial institution will be able to take. Under Basel III,
banks will be required to increase their Tier 1 capital to at least 6% of risk-weighted assets
(RWA). Most of this capital will need to be in the form of common equity. And by 2015, at least
4.5% RWA should be used by banks as a maximum for market shock absorbency. In addition,
banks will be required to hold a capital conservation buffer of 2.5% to withstand future periods
of stress, bringing the total common equity requirements to 7%. The purpose of this buffer is to
ensure that banks maintain an amount of capital that can be used to absorb losses during periods
of financial and economic stress. There will be also a countercyclical buffer ranging from 0% to
2.5% of common equity or other fully loss-absorbing capital that should be implemented
according to national circumstances.
5
2.3. Basel Accord and Islamic Banks
Islamic banks play the same role in the economy as conventional banks. They allow savers and
investors to earn a return on their capital by disbursing credit and arranging financing. They are
hence exposed to categories of risks that are endogenously or exogenously common to
conventional banks. The new Basel III framework sets out better risk coverage and emphasizes
supervisory and risk management practices.
Islamic banks are, in theory, profit and loss sharing (PLS) based organizations with an equitybased capital structure. That is why they are generally perceived as exceeding the regulatory
requirement set by the Basel accords. In reality, however, the various functions of deposit
collection and credit utilization performed by these banks imply information asymmetries among
depositors and investors and could impact the capacity of the bank to handle the repayment
capabilities for risk-averse depositors and to deliver optimal monetary return to the risk-taking
investors.
The calculation of Tier 1 capital, Tier 2 capital, and risk-weighted assets (RWA) in Islamic
banks could be more tricky for many reasons. First, the complexity in the definition of capital in
these banks makes it difficult to determine what capital would be available should losses arise.
The Basel II framework included some limitations that permitted tangible common equity
capital, the best form of capital, to be as low as 1% of risk-weighted assets. With Basel III,
profit-sharing investment accounts in Islamic financial institutions could not be included as a
component of capital because of their risk-absorbing capability. Moreover, certain items must be
fully deducted in the calculation of common equity tier; these include goodwill and all other
intangibles. Thus, competitive intangibles (human capital, know-how, collaboration activities,
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and so on) must be included in the valuation of significant investments in the capital of Islamic
financial entities.
One of the other impacts of Basel III capital requirements is that instruments with a 10-year
maturity, but with a step-up after 5 years, which were considered as a form of Basel II Tier 2
capital will no longer constitute Basel III Tier 2 capital. This means that many Islamic negotiable
instruments of deposit that no longer qualify as non-common equity Tier 1 or Tier 2 capital will
be gradually phased out. Their recognition will be capped at 90% from January 1, 2013, with the
cap reducing by 10% in each subsequent year. In addition, many Islamic banks have been active
investors in other Islamic banks and takaful companies and own a significant amount of these
institutions’ Tier 1 and Tier 2 capital securities. Under Basel III, these banks are required to
deduct their excess investments in the capital instruments of unconsolidated financial institutions
using a corresponding deduction approach. This capital deduction may result in the withdrawal
from the market of banks as buyers for financial organizations’ new issue capital securities.
Another key breakthrough of Basel III is that Islamic banks will no longer be able to pursue
distribution policies that are inconsistent with sound capital conservation principles. Banks in
general will have to build capital buffers during prosperous times, and as the economy begins to
contract, they may be forced to use these buffers to absorb losses. The Basel Committee now
requires banks to maintain a buffer of 2.5% of risk-weighted assets. This buffer must be held in
tangible common equity capital. But to offset the contraction of the buffer, banks could have the
ability to restrict discretionary payments, such as dividends and bonuses, to shareholders,
employees, and other capital providers. Consequently, Islamic banks will be required to retain an
increasingly higher percentage of their earnings and will face restrictions on distributable items,
7
such as dividends, share buybacks, and discretionary bonuses. Yet, Islamic banks still could also
raise additional capital in the market.
Basel Accord makes no distinction between conventional and Islamic financial institutions for
capital requirements (Errico and Farahbaksh, 1998). Basel Committee for Banking Supervision
has not taken into account the unique features of Profit sharing investment accounts (PSIA).
PSIA assets do not imply financial risks for the Islamic bank as the risk in it is taken by the
investment account shareholders, but still PSIA assets are not considered as equity capital by the
Basel regulators. PSIA has impact on the risk weighted assets and capital adequacy computation
for Islamic Banks. In 2005, IFSB has issued a guideline which helps Islamic banks to compute a
ratio equivalent to the Basel II capital adequacy ratio by in taking into account the PSIAs
specificities. In effect, the capital amount of PSIA is not guaranteed by the Islamic bank. Any
losses arising from investments or assets funded by PSIA are for the owners of theses PSIAs and
so do not require any regulatory capital requirement. This implies that assets funded by restricted
or unrestricted accounts of PSIAs should be excluded from the calculation of the denominator of
the capital ratio.
As far as Islamic banking financing practices are concerned, literature shows that the Islamic
banks are among the best capitalized banks in the world. Bashir and Hassan(2004) in a research
study also argue that the Islamic banks have a better capital
asset ratio as compared to
conventional banks which means that Islamic banks are well capitalized.
Basel III improves the risk coverage of capital market activities, especially counterparty credit
risk on over the counter derivatives and in the trading books of banks. Harzi (2012) argues that
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an Islamic bank requires a far lesser Risk Weighted Assets than the conventional banks under
Basel III. As trading book business and short selling is prohibited in Islamic banking. Moreover,
the major part of the additional RWA in Basel III is linked to such instruments that Islamic banks
do not hold in their portfolios, such as CDO, CDS, repos or interest rates swap.
2.4. Basel Accord III and lending practices
There are several studies that highlight the implication of Basel accord for conventional banks on
lending practices (e.g. Furlong (1992), Haubrich and Wachtel(1993), Bernanke and Gerther
(1995), Peek and Rosengren(1995) , Peristiani (1996), Wagster (1999), Furfine (2000), Chiuri,
Ferri and Majnoni (2001)) while in Islamic banking the literature on this topic is rare. They
concluded that the banks that cannot meet or satisfy the international Basel Accord may resort to
credit crunch to reduce their risky assets in line with the capital adequacy ratio. The implication
of higher capital requirement is that banks are forced to contract loan supply, resulting in a credit
crunch. The theoretical underpinnings for this argument are articulated in Bernanke and Gertler
(1995). Tightening capital regulations may impose additional constraints on banks’ ability to
acquire external funds. If banks are unable to comply with the higher capital requirement, they
opt to shrink credit supply instead (Myers and Majluf,1984).
However, in the context of Basel Accord II, Ismail (2003) argues that Malaysian Islamic banks
increase their capital ratios by reducing their volume of financing. He explains that the Islamic
banks can sell off financing or convert financing to securities that have a lower risk-weight in
calculating capital ratios. He further concludes that the Islamic banks reduce their riskier assets
and as a result their capital adequacy ratio increases. He finds that Malaysian Islamic banks
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effectively increase their capital ratios by shifting to 20% risk weighted category from higher
risk categories.
Similar findings are also evident in literature for conventional banks in Japan. Kim and Moreno
(1994) finds that the regulatory environment forced banks in Japan to pay more attention to their
capital positions, resulting in a slowdown in the growth of lending. Ito and Sasaki (1998) provide
evidence that individual Japanese banks with lower capital ratios had a tendency to reduce
lending. Using Japanese banking data, Woo (1999) find evidence that supports the effect of
capital crunch on lending growth in the early nineties. Honda (2002) find that international
capital standards reduced credit expansion in Japan slightly more than domestic regulations.
Montgomery (2005) investigates the hypothesis that the capital adequacy ratio, introduced under
the Basel Accord, caused Japanese banks to shift their portfolios away from heavily weighted
risk, such as loans and corporate bonds, into less risky assets, such as government bonds.
Another strand of literature points out that there could be significant costs of implementing a
regime with higher capital requirements (e.g. BIS, 2010b, and Angelini, 2011). Higher capital
requirements will increase banks’ marginal cost of loans if, contrary to the Modigliani-Miller
(1958) Theorem, the marginal cost of capital is greater than the marginal cost of deposits, i.e. if
there is a net cost of raising capital. In that case, a higher cost of equity financing relative to debt
financing, would lead banks to raise the price of their lending and could slow loan growth and
hold back the economic recovery.
Several studies have examined the impact of higher capital requirements on bank lending rates
and the volume of lending. Kashyap, Stein, and Hanson (2010) calibrates key parameters of the
10
United States’ banking system to identify the impact of an increase in the equity to asset ratio. It
finds an upper bound of 6 basis points for the increase in U.S. banks lending spreads following
an increase in the capital to asset ratio in line with that required under Basel III. BIS (2010b)
estimates a significantly higher increase in the lending spread, on the order of between 12.2 and
15.5 basis points, based on simulations with 38 macroeconomic models maintained by the
central banks of advanced economies. Angelini and others (2011) reports similar findings.
Similarly, using aggregate banking data, Slovik and Cournede (2011) uses accounting relations
to find that lending spreads could be expected to increase by about 15 basis points.
2.4. Islamic Banking Sector Developments and Basel Accord in Pakistan
In Pakistan Islamic banking emerged as a response to both religious and economic needs.
Currently there are five (5) full-fledged licensed Islamic banks and conventional banks have
licenses to operate dedicated Islamic banking branches. The total assets of the Islamic banking
industry are over 837Billion as of December 2012 which accounts for a market share of 8.6%
of total banking industry assets. Total branch network of the industry comprise of more than
1097 branches. State Bank of Pakistan (SBP) has over the years attempted to develop a
supportive regulatory framework that has special emphasis on shariah compliance that is in line
with the best international practices.
State Bank of Pakistan (SBP) has chalked out a roadmap for implementation of Basel-II under
which the conventional and Islamic banks are required to adopt standardized approach for credit
risk and basic indicators/standardized approach for operational risk from 1st January, 2008 and
internal ratings based (IRB) approach from January1, 2010. SBP has embarked on a parallel run
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program of one and a half year for Standardized Approach and two years for IRB Approach
starting from 1st July 2006 and 1st January 2008 respectively.
3. Theoretical Framework
Spread
Basel III- Capital
Requirements
Financing Behavior of
Islamic Banks
Provisions for
Non Performing
Financing
Financing
Volume
4. Methodology
Previous research has investigated the link between bank capital regulation and loan growth from
the conventional bank perspective (Bernanke and Lown,1991; Furlong, 1992; Hancock and
Wilcox, 1992; Bizer, 1993; Cantor and Wenninger, 1993; Haubrich and Wachtel, 1993; Baer and
McElravey, 1994; Berger and Udell, 1994; Hancock et al., 1995; Peek and Rosengren, 1995).
Most of the previous studies have attributed the credit crunch with the adoption of capital
standards of Basel I,II and III from the developed countries context.
To establish whether regulatory enforcement actions i.e Basel Accord have contributed to a
credit crunch, the study constructed a annual time-series and cross-section panel of Islamic
banks data in Pakistan. The current study employ three measures of Islamic bank’s lending
behavior: Total financing, Spread and provisions to non performing financing. The empirical
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analysis proceeds by investigating the financing behavior of Islamic banks after adopting the
Basel Accord I and II. Data is composed of Nine (9) Islamic banks with a sample period of 20082012 (Table 1 provides the list of sample Islamic banks). The analysis proceeds systematically
by exploring the following models.
FVit =∝+𝛽 1 CRit+𝜀 it ……………………………………..(i)
Speadit =∝+𝛽 1 CRit+𝜀 it ……………………………………..(ii)
Provisionit =∝+𝛽 1 CRit+𝜀 it ……………………………………..(iii)
The dependent variable in our analysis is the financing behavior of Islamic banks that can be
measure in terms of three dependent variables i.e the financing volume (FV), spread and
provisions of non performing financing (Provision). The independent variable is the capital to
assets ratio (CR) of Basel accord.
5. Finding and Discussion
Before the discussion on the empirical estimation of models (i), (ii) and (iii) table 2 provide a
relevant statistics of Islamic banking industry in Pakistan. Average total assets in 2008 were Rs.
276 billion which stand at Rs.837 billion in 2012. Net Islamic Financing and Investment grew
from Rs.186 billion in 2008 to Rs.626 billion in 2012.
Table 3 presents the results of estimating the empirical model in (i). There is significant positive
relationship between total financing to assets ratio and capital to asset ratio of Islamic banks in
Pakistan for the period 2008-2012. The results are contradictory with the empirical studies (e.g.
Chiuri, Ferri and Majnoni (2001)) for conventional banks in the context of developed countries.
According to the literature with the increase in capital ratio under Basel Accord III the lending
activities decreases that may cause credit crunch. This situation may become even worse in the
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absence of credit providing institutions other than bnaks in developing countries. As banking
sector play an important role to fuel the growth in economy by providing credit to deficit units in
economy. With the increase in capital ratio this vital role will be affected as now the banks will
limit their lending activities to raise the capital ratio under Basel Accord. But the present study
on Islamic banking industry shows that the Islamic banks in Pakistan are still increasing their
financing volume compared to the raising capital ratios of Basel Accord.
Descriptive statistics of the Islamic banking industry shows that the investments in Government
securities grew from Rs. 25.6 million to Rs. 278 million from the period 2008-2012. This shows
that Islamic banks in Pakistan increase their financing and investments by investing their assets
into less riskier categories in order to increase the capital to assets ratio. This finding is also
consistent with the work of Ismail (2003) who explained that the Malaysian Islamic banks
convert and sometimes sell their financing portfolios to Government securities that have low risk
weightage to avoid the higher capital ratios. Montgomery (2005) also shows the same findings in
the context of Japanese banks.
Table 4 presents the results of estimating the empirical model in (ii). There is significant positive
relationship between spread ratio and the capital to assets ratio of Islamic banks in Pakistan for
the period 2008-2012. The results are in line with the empirical studies of (Kashyap, Stein, and
Hanson (2010)and Angelini (2011) for conventional banks in the context of developed countries.
As they found an upper bound of 6 basis points for the increase in U.S. banks lending spreads
following an increase in the capital to asset ratio in line with that required under Basel III.
14
Table 5 presents the results of estimating the empirical model in (iii). There is significant
positive relationship between provisions for the non performing financing ratio and the capital to
assets ratio of Islamic banks in Pakistan for the period 2008-2012. The results are in line with the
empirical studies of Ismail (2003) for Islamic banks in Malaysia. As higher capital ratio is
required if the bank financed riskier projects. Increased provision for non performing loans with
the higher capital ratio in Islamic banks of Pakistan shows that the banks management perceive
more risk for riskier projects and allocate more provisions to increase the capital reserves.
6. Conclusion
Basel Accord a risk-based capital approach has the advantage of reducing bank’s incentive to
engage in risky activities by requiring a higher level of capital backing, but allowing them to
reduce their capital as they shift to safer activities. Islamic banks in Pakistan increase their
financing volume as the capital ratio of Basel Accord I and II increased. This increasing practice
of financing by Islamic banks is unique in the presence of altering the financing portfolio to less
riskier weighted assets by diversifying their financing portfolios into Government securities. This
practice discourages the growth of financing to the private sector that ultimately causes a slow
growth in economic activities. Moreover, the Islamic banks in Pakistan increased their spreads
with the increase in capital ratio under Basel Accord I and II. As under Basel Accord III the
capital requirements become more stringent, it is expected that the dependent variables
(financing volume, spread and provisions for the non performing financing) will be adversely
affect by an increasing capital ratio. Future research will be encouraged to estimate the impact of
Basel III while capitalizing on simulation approach. Policy makers should understand the
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positive and significant relationship between the financing behavior and the Basel requirements
and need to analyze the tradeoff of implementing Basel III.
16
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Appendix
Table 1: List of Islamic banks in sample period 2008-2012
S.No.
Name
No. of
Branches
Islamic Banks
1.
Meazan Bank Limited
2.
AlBaraka Bank (Pakistan) Limited
3.
BankIslami Pakistan Limited
4.
Dubai Islamic Bank Pakistan Limited
Islamic Branches of Conventional Banks
5.
Askari Bank Limited
6.
Bank Alfalah Limited
7.
Habib Bank Limited
8.
MCB Bank Limited
9.
The Bank of Khyber
310
92
88
100
33
110
33
27
36
Table 2: Summary Statistics of Islamic Banking Industry of Pakistan (Rupees in Billions)
Total Assets
Net Financing & Investments
Federal Govt Securities
2008
276
186
25.6M
2009
366
226
78.6M
2010
477
338
153.1M
2011
641
475
179M
2012
837
626
278M
Source: Islamic Banking Bulletin December, 2012
Table3: Results of the Total Financing to Asset ratio with Capital to Assets ratio for Islamic banks
sample period 2008-2012
Dependent Variable: Total Financing to Asset ratio
Method: Panel Least Squares
Date: 05/09/13 Time: 17:06
Sample: 2008 2012
Cross-sections included: 9
Total panel (unbalanced) observations: 44
Variable
Coefficient
Std. Error
t-Statistic
Prob.
C
Capital to Asset Ratio
0.167457
2.268835
0.055734
0.480168
3.004563
4.725089
0.0050
0.0000
Effects Specification
Cross-section fixed (dummy variables)
R-squared
Adjusted R-squared
S.E. of regression
0.479705
0.341980
0.146013
Mean dependent var
S.D. dependent var
Akaike info criterion
0.409398
0.179999
-0.813531
22
Sum squared resid
Log likelihood
Durbin-Watson stat
0.724869
27.89768
1.830007
Schwarz criterion
F-statistic
Prob(F-statistic)
-0.408033
3.483066
0.003821
Table4: Results of the Spread to Asset ratio with Capital to Assets ratio for Islamic banks sample
period 2008-2012
Dependent Variable: Spread
Method: Panel Least Squares
Date: 05/09/13 Time: 17:22
Sample: 2008 2012
Cross-sections included: 9
Total panel (unbalanced) observations: 44
Variable
Coefficient
Std. Error
t-Statistic
Prob.
C
Capital to Asset Ratio
0.009262
0.324479
0.008197
0.070620
1.129965
4.594709
0.2664
0.0001
Effects Specification
Cross-section fixed (dummy variables)
R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
Durbin-Watson stat
0.626388
0.527491
0.021475
0.015679
112.2378
2.156245
Mean dependent var
S.D. dependent var
Akaike info criterion
Schwarz criterion
F-statistic
Prob(F-statistic)
0.043864
0.031241
-4.647172
-4.241675
6.333725
0.000032
Table5: Results of the Provisions for financing Asset ratio with Capital to Assets ratio for Islamic
banks sample period 2008-2012
Dependent Variable: Provisions for financing
Method: Panel Least Squares
Date: 05/09/13 Time: 17:29
Sample: 2008 2012
Cross-sections included: 9
Total panel (unbalanced) observations: 44
Variable
Coefficient
Std. Error
t-Statistic
Prob.
C
Capital to Asset Ratio
-0.009491
0.164237
0.004557
0.039256
-2.082901
4.183724
0.0449
0.0002
23
Effects Specification
Cross-section fixed (dummy variables)
R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
Durbin-Watson stat
0.615938
0.514275
0.011937
0.004845
138.0750
2.329286
Mean dependent var
S.D. dependent var
Akaike info criterion
Schwarz criterion
F-statistic
Prob(F-statistic)
0.008023
0.017128
-5.821590
-5.416092
6.058603
0.000048
24