The equity to assets (EA) ratio is included as a proxy of the overall capital strength and leverage and its impact on bank profitability is ambiguous. As the lower ratio suggests a relatively risky position, one would expect a negative coefficient on this variable. However, it could be the case that higher levels of equity suggest cheaper cost of capital and therefore this variable may have a positive impact on profitability (Molyneux 1993). Moreover, a higher equity to assets ratio tends to reduce the risk of equity and therefore lowers the equilibrium expected return on equity required by investors. On the other hand, an increase in capital may raise expected earnings by reducing the expected costs of financial distress, including bankruptcy. Studies by Bourke (1989) and Molyneux and Thornton (1992) observe a positive relationship between the equity to assets ratio and bank profitability. (Panagiotis et al, 2007)