Basel III Regulations and Financing Decisions of Nonfinancial Firms: The South African Evidence

ABSTRACT This study examines the impact of the Basel III regulatory framework on financing decisions within South Africa's real sector. Using a sample of 2045 firm‐year observations spanning the years 2011–2015 and employing the difference‐in‐differences approach, we find a significant decrease in debt financing and debt maturity for firms deemed ‘constrained’ relative to ‘unconstrained’ firms in the post‐Basel III implementation period. Further analyses suggest that the Basel III regulatory framework has a persistent effect on financing decisions in the real sector. Our findings indicate that the Basel III regulatory framework reduces leverage and debt maturity, especially for constrained firms.