A higher equity financing (E/A) is negatively related to profitability existence, but positively to above
average ROAE. The former could be explained by the fact that small banks usually have higher equity
financing as they do not enjoy implicit protection from the lender of last resort if financial distress
occurs. At the same time, small banks have lower profitability in comparison to the large ones or they
record losses. A positive sign of E/A in relation to ROAE could be a consequence of: 1) accounting
treatment of equity costs i.e. equity is almost cost-free funding source and/or 2) lower refinancing
costs due to better credit capacity of bank (Kundid, 2012).