Abstract

This paper examines the explanatory factors influencing the capital adequacy ratio (CAR) of commercial banks in Bangladesh. The study covers all commercial banks during the period 2010-2020. There were 47 banks in 2010, which increased to 60 by 2020. Thus, the panel was unbalanced. We examined the relationship between CAR, the dependent variable, and the following independent variables: earnings-to-assets ratio, profitability, liquidity, net interest margin, growth, size, loans-to-assets ratio, and deposits-to-assets ratio. We have used Ordinary Least Squares, GLS-random effect, and GLS-fixed effect models using STATA-14 to estimate the parameters in multiple regression analysis. The results show that bank size, equity-to-asset ratio, and earnings on assets had a significant positive effect on the capital adequacy ratio, whereas nonperforming loans, interest rate spread, credit growth, net interest margin, and inflation rate had negative and statistically significant effects.