Abstract:

The capital adequacy ratio is applied to banks as a legal obligation. Although the minimum rate of capital required to be held according to the legal arrangement is 8%, much higher rates are always applied in the Turkish banking sector. The factors affecting this ratio, which ex-ceeds the minimum amount, and the reasons for this apart from the legal requirement have been discussed in studies. The aim of this study was to determine the financial indicators that explain and affect the capital adequacy levels of banks, which are the leading financial institutions. Therefore, in this research, capital adequacy ratios were taken as the dependent variables, while balance sheet structure, asset quality, liquidity, profitability, income-expenditure structure and sector shares were taken as the independent variables. The method of calculating the ratios is similar way with each other and so, high correlation between them creates a methodological constraint. But, in the study, Elastic Net Regression analysis, which is a combined application of the ridge and lasso regression methods used in cases of the multicollinearity problem, was used. As a result of the study, it was revealed that in all of the models created for four capital adequacy ratios, equity-related ratios explained capital adequacy the most and that profitability ratios affected capital adequacy the most. 

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