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

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.