The Impact of Capital Structure on Tobin's Q of Commercial Banks:

Evidence from MENA Countries

Abstract

This study sought to verify the impact of capital structure on the value of (Tobin’s Q) of banks, for the study population consisting of commercial banks operating and listed in the markets of 11 countries from the banking sector in the (MENA) country region. The quantitative part of this study relied on balanced annual panel data obtained from (86) commercial banks from the countries under study, during the period from 2011 to 2020. The study relied on multiple regression analysis, taking into account the characteristics of the panel data. Using the Corrected Standard Error Estimation (PCSE) model, the regression results found that the leverage ratio had a negative and statistically significant effect on the value of Tobin’s Q for commercial banks. The results also showed that the capital adequacy ratio has a positive and statistically significant effect on the value of Tobin’s Q for commercial banks. Based on these findings, the study recommends that commercial banks adopt appropriate strategies to build an optimal capital structure and highlight Islamic financing methods to attract savings and financial resources.