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

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

doi:10.3390/ijfs5020013

Cited by 60 publications

(79 citation statements)

References 29 publications

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“…Hence it is reasonable to expect that any deviations in the sector would cause a domino effect on the financial markets and economy. Besides the tight- Siddik et al(2017). Also, it is seen that the insignificant finding regarding return on equity is compatible with the approach of Modigliani and Miller arguing that the financial performance is independent of the capital mixture.…”

Section: Discussionsupporting

confidence: 80%

Can Capital Structure Affect the Financial Performance of Banks in Turkey?

Tuncay

2018

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Abstract:The aim of this study is to investigate the determinants of banks' financial performance in terms of the capital structure. Annual financial statements of 11 banks traded in Borsa Istanbul are employed for the period of 2006-2016.Return on assets, return on equity and earnings per share are chosen for financial performance measures. The independent variables related to the capital structure are capital adequacy, equity-to-asset, and financial leverage ratios. In addition, macroeconomic variables and bank-specific variables are also considered as control variables for the analysis.The data are analyzed by the panel data regression analysis as it provides more informative finding and less multicollinearity among variables than time series and cross-sectional analyzes.The Hausman test results indicate that the random effects model is appropriate for the whole dependent variables.According to the findings; while equity-to-asset ratio affects return on assets positively, amongst the control variables specific to firms, firm size, asset quality and asset growth variables have significant effects on return on assets. It is found no significant effect of independent variables on return on equity, however, it is seen that asset quality has a negative and significant effect. Inflation and interest rates have a significant effect on both variables. Finally, it is seen that equity-to-asset ratio has a positive and significant effect on earnings per share. Only the effect of asset quality on earnings per share is found to be significant among the control variables. Findings of the study are consistent with the previous studies. In addition, the M&M views are not supported by the findings related to return on assets and earnings per share but the return on equity.

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Section: Discussionsupporting

confidence: 80%

Can Capital Structure Affect the Financial Performance of Banks in Turkey?

Tuncay

2018

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“…This indicates that the independent variable SLA has a negative and significant impact on ROA as a dependent variable that proxies for profitability. The same findings were conducted by Siddik, et al (2017). It also illustrates that the coefficient value of LLA is -0.2462 at 0.0291 significance level, less than P=0.05.…”

Section: Results Of Roa Model:-supporting

confidence: 69%

“…According to many previous studies return on assets (ROA), which is net income after interest and taxes to total assets, and return on equity (ROE), which is net income after interest and taxes to total equity, were proxies for the profitability (Siddik, et Growth rate (GRO) is measured as: (Siddik, et al, 2017;Saeed, et al, 2013) (SC) resembles the Syrian crisis: it is a dummy variable measured by 0 before crisis, and 1 during crisis (Sahyouni, 2015). Since 2011, Syria has suffered from political crisis invaded the Middle-East, which affected the economic sectors.…”

Section: Dependent Variables:-mentioning

confidence: 99%

The Impact of Financial Structure on Profitability: An Applied Study on Traditional Private Banks Working in Syria for the Period (2009 – 2013).

Lteef¹,

Sharaf²

2018

IJAR

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“…Findings of this study reported that there was a significant negative relationship between capital structure and performance. Similar studies were conducted by Allahham (2015) in Saudi Arabia and by Siddik, Kabiraj and Joghee (2017) in Bangladesh. It was hard to see the study on the relationship between capital structure and bank performance in Sri Lanka.…”

Section: Introductionsupporting

confidence: 79%

Is Net Interest Margin influenced by Firm's Capital Structure Pattern: A Study on Commercial Banks in Sri Lanka

Kengatharan

Sivalingam²

2018

AJFA

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Objectives of this study were to examine the capital structure pattern of Sri Lankan commercial banks and to investigate the influence of capital structure pattern on net interest margin of commercial banks in Sri Lanka. This study was conducted with 10 licensed commercial banks which were listed in Colombo Stock Exchange (CSE), Sri Lanka. Panel data analysis was used to carry out the empirical study and data were extracted from the annual reports of selected companies for the ten years period from 2007 to 2016. Capital structure patterns of licensed commercial banks were measured by total debt to total assets ratio, long term debt to total assets ratio, and short term debt to total assets ratio. Net Interest Margin (NIM) was measured by net interest income to average earnings assets ratio. NIM specifies the cost and efficiency of financial intermediation by banks. Size of the banks and growth in banks deposit were considered as control variables. Descriptive statistics, correlation, pooled, fixed effect and random effect models were used for the data analysis. According to the descriptive statistics, present study found that commercial banks had lower leveraged capital structure pattern in Sri Lanka. F test was performed to diagnose the time fixed effect in the fixed effect model and outcome of the test revealed that p value was less than 0.05. Therefore, null hypothesis was rejected and fixed effect model was most appropriate than pooled OLS. Further, Lagrange Multiplier test for random effect was performed. The result indicated that the p value was 0.000 and rejected the null hypothesis in favor of the alternative which implied that random effect model was more appropriate than pooled OLS. Therefore, Hausman Specification test was performed to find out whether fixed or random effect model is suitable to examine the relationship between capital structure and NIM. Fixed effect model was considered as the most suitable model to examine the relationship between capital structure and NIM in this study. As per the result of fixed effect model, total debt to total assets ratio and long term debt to total asset ratio were significantly negatively related to NIM. Short term debt to total assets ratio, and size were not significantly related NIM. Results of the study suggest that financial managers should try to finance from retained earnings rather than relying heavily on debt capital in their capital structure. Outcome of the study may useful to the practitioners, investors and decision makers in order to maximize their return from their investments.

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

Cited by 60 publications

References 29 publications

Can Capital Structure Affect the Financial Performance of Banks in Turkey?

Can Capital Structure Affect the Financial Performance of Banks in Turkey?

The Impact of Financial Structure on Profitability: An Applied Study on Traditional Private Banks Working in Syria for the Period (2009 – 2013).

Is Net Interest Margin influenced by Firm's Capital Structure Pattern: A Study on Commercial Banks in Sri Lanka

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