Effects Of Profitability, Liquidity & Credit Risk On Asean-6 Banks’ Capital Structure: Covid-19 As Moderator

Abstract

This study investigates the effect of profitability, liquidity, and credit risk on commercial banks' capital structure in ASEAN-6 countries, with COVID-19 as a moderating factor. Using 615 panel data points from 109 commercial banks across six ASEAN countries over the 2018–2023 period. The analysis employs a multiple regression and moderated regression analysis, with external controls include bank size, asset growth, inflation, and GDP growth. Results show credit risk and liquidity have a significant negative effect on capital structure, while profitability, COVID-19 pandemic, and their interaction with the key determinants are not significant. These outcomes align with Pecking Order Theory, suggesting that higher liquidity leads banks to rely less on external debt. This is particularly evident as increases in the Loan to Deposit Ratio diminish liquidity, thus influencing the banks' capital decisions.