Impacts of Capital Structure on Performance of Banks in a Developing Economy: Evidence from Bangladesh

Siddik, Md. Nur Alam; Kabiraj, Sajal; Joghee, Shanmugan

doi:10.20944/preprints201611.0110.v1

Cited by 19 publications

(38 citation statements)

References 14 publications

(37 reference statements)

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“…Based on the studies indicates that effect of return on asset (ROA) on bank profitability. These empirical findings are supported by the researchers [8][9][10]. Taani [10] found that the correlation between capital structure and performance of Jordanian bank is positively from 2007 to 2011.…”

Section: Literature Reviewsupporting

confidence: 56%

Untitled

2018

JSSH

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This study will analyze the profitability of the local and foreign banks in Malaysia by the internal and macroeconomic perspective using the Pooled OLS Method, Fixed Effect Method and Random Effect Method. The study found out that only 8 variables are significant for the local banks and 6 variables are significant for the foreign banks. The panel data has been used during 2007 until 2016. Inflation Rate and Real Interest are negatively influence the movement of the bank's profitability.

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Section: Literature Reviewsupporting

confidence: 56%

Untitled

2018

JSSH

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“…The adjusted R-squared of 0.47 indicates that 47% in the variation of return on asset is explained by debt to equity ratio, asset tangibility and age. On a whole, the results does not conform with the a priori expectation and it is also supported by the work of [27,29,25,32,16,11,30,31,33,14,35]. It is therefore established that capital structure has a negative influence on Bank performance and brings no improvement to the wealth of shareholders.…”

Section: Panel Regression Resultsmentioning

confidence: 75%

“…For instance, Siddik, Kabiraj et al [14] concluded the data of 22 banks over a period of 2005-2014 and observed capital structure have negative effect on return on equity, for data analysis used the least square technique.…”

Section: Empirical Evidencesmentioning

confidence: 99%

Effect of Capital Structure on Financial Performance of Listed Banks in Nigeria

Adeoye

Olojede

2019

AJEBA

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Corporate entities all over the world are faced with the problem of determining appropriate finance that will boost the value of the entity and maximize the wealth of shareholders. However, for overall wealth of shareholders to be met and consistent increase in value of Banks to be achievable, capital either debt in form of customers deposit or equity capital raised from investors is inevitable. This study therefore examined the effect of capital structure on the performance of some selected banks in Nigeria. The objectives were to examine the relationship that exists between capital structure and financial performance and to investigate the effect of capital structure on the financial performance of quoted deposit money banks in Nigeria. To achieve these, a cross sectional time series secondary data covering the period of seven years (2012-2018) was extracted from the audited financial statement of ten (10) banks listed on the floor of stock exchange. The descriptive statistics, Pearson moment correlation and multiple linear regressions were used. The correlation results showed that capital structure is negatively correlated with financial performance (ROA and ROE). Result from panel regression revealed that debt to equity though significant, impacted negatively on return on assets and return on equity ( = −0.1266, < .01; = −5.3571, > .01) , asset tangibility significantly impacted return on asset but 2 insignificantly impacted return on shareholder's equity ( = −0.0235, > .05; = −0.3527, > .10) and also Age have a significant impact on return on asset and insignificant effect on return on equity ( = −0.0141, < .01; = −0.1497, > .10). This study therefore concluded that capital structure have a negative effect on the financial performance of deposit money banks in Nigeria and recommended that appropriate proportion of capital should be tailored towards viable investment opportunities for maximum return of shareholders wealth and increase in value of the firm. More so, while finance manager is alert to the movement in the stock market, banks should take precautionary measures for mitigating credit risk associated with lending and borrowing.

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“…The ability of the Company to impose greater control over elements of the capital structure through its administrative control resulting from the preference of long-term financing owners to borrow instead of issuing new shares so as not to lose part of their control of the company to new shareholders (Siddik, et al, 2016).…”

Section: B) Repayment Capacitymentioning

confidence: 99%

“…Using panel data of 22 banks for the period of2005-2014 (Siddik, et al, 2016) explain that Capital structure decision plays an imperative role in firm's performance. Recognizing the importance, there has been many studies inspected the rapport of capital structure with performance of firms and findings of those studies are inconclusive.…”

Section: Literature Reviewmentioning

confidence: 99%

The Impact of Capital Structure on the Financial Performance of the Jordanian Industrial Companies Listed on the Amman Stock Exchange for the Period 2012-2015

AlAli

2018

AJFA

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The purpose of this study was to identify the effect of the capital structure as a percentage of total liabilities to total assets on the financial performance of the Jordanian industrial companies listed on the Amman Stock Exchange for the period 2012-2015.The study population included all the Jordanian general industrial companies listed on the Amman Stock Exchange. The sample of the study included 10 industrial companies listed on the Amman Stock Exchange. The linear regression analysis was used to test the relationship between variables using the ordinary least squares method (OLS).The results showed that there is a positive significant impact on the capital structure of the industrial shareholding companies listed in the Amman Stock Exchange as measured by the ratio of equity to total assets, return on equity and return on assets and net earnings per share as an indicator of financial performance.The results also showed a negative significant impact on the capital structure of industrial shareholding companies listed on the Amman Stock Exchange as measured by total liabilities to total assets, return on equity and return on assets as an indicator of financial performance, and net earnings per share as an indicator of the financial performance indicators.

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Impacts of Capital Structure on Performance of Banks in a Developing Economy: Evidence from Bangladesh

Cited by 19 publications

References 14 publications

Untitled

Untitled

Effect of Capital Structure on Financial Performance of Listed Banks in Nigeria

The Impact of Capital Structure on the Financial Performance of the Jordanian Industrial Companies Listed on the Amman Stock Exchange for the Period 2012-2015

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