The Effects of Technology and Liquidity on Bank Capital Structure

This research enhances the literature on bank capital structure by combining financial intermediation theory with technological innovation to analyse the impact of FinTech adoption and liquidity management on leverage choices in South African banks. Utilising panel data spanning 2015 to 2024 and applying the Generalised Method of Moments (GMM) to tackle endogeneity and dynamic persistence, the research presents new findings from an overlooked emerging market setting. The results show a diverse effect of technology on leverage. Conventional banking systems, represented by automated teller machines (ATMs), show a positive relationship with the total debt ratio (TDR), suggesting a capital-intensive nature of tangible assets. Conversely, digital technologies such as mobile banking and a composite FinTech Index display a notable negative correlation with leverage, indicating that digital transformation improves efficiency, strengthens internal funding capacity, and reduces dependence on external debt. Moreover, increased liquidity levels are negatively correlated with leverage, suggesting that well-capitalised banks with robust liquidity rely less on debt funding. By examining FinTech and liquidity dynamics, the research contributes to both theory and practice, emphasising digital innovation as an alternative to external funding and stressing the importance of sound liquidity management amid evolving regulatory environments such as Basel III.