IMPACT OF CAPITAL STRUCTURE ON FINANCIAL PERFORMANCE OF DEPOSIT MONEY BANKS (DMBS) IN NIGERIA
Abstract
The aim of this study is to assess the impact of capital structure on the financial performance of deposit money banks in Nigeria. The study adopted an ex-post facto research design and it considers variables Long term debt to Asset(LTD/TA),Short term debt to total Asset (STD/TA) and Total debt to total Asset (TD/TA) of capital structure and financial performance which was proxy by Return on Asset(ROA). The study sourced secondary data using a convenient sampling technique based on the availability of data as at the period of the study. These data were obtained from annual financial report of the five sampled Deposit Money Banks in Nigeria covering a period of 2009 -2018. The data obtained were analysed using descriptive statistic (i.e. mean and standard deviation) and inferential statistic (i.e. Pearson correlation and regression analysis). The results of the analysis reveals that STDTA (β= 0.936554, p<0.05) and TDTA (β= 0.310692, p< 0.05) have significant positive impact on ROA. While LTDTA (β= 0.08686, p> 0.05) has insignificant positive impact on ROA. Therefore, the study summarily recommends that stakeholders of, deposit money banks in Nigeria should use more of short term debts portion of capital structure, the manner of utilizing the resources while expanding the banks and the amount of investment on fixed asset to the ratio of short term debt should be given keen considerations. On this note, investors must pay more attention to the capital structure mix of DMBs before investing in them.
Keywords
Full Text:
PDFReferences
Adekunle, A.O & Sunday, O.K. (2010). Capital Structure and Firm Performance: Evidence from Nigeria. European Journal of Economics, Finance and Administrative Sciences, 25,(6)71-80
Adeoye, S.&Olojede, S. (2019). Effect of Capital Structure on Financial Performance of Listed Banks in Nigeria. Asian Journal of Economics, Business and Accounting, 12(2), 1-14.
Ahmed, H. U., Ningi, S. I. &Dalhat, B. S, (2018). Capital Structure and performance of Deposit Money Banks in Nigeria. Nigeria Deposit Insurance Corporation Quarterly Research, 33 (3 & 4), 49-76.
Anarfo, E. B. &Appiahene, E.(2017). The Impact of Capital Structure on Banks’ Profitability in Africa. Journal of accounting and Finance, 17(3), 55-66.
Awunyo, D. V.& Badu, J. (2012). Capital Structure and performance of listed banks in Ghana. Global Journal of Human Social Science,12 (5), 1-7.
Aymen, B. M. M. (2018). Impact of capital on financial performance of banks: the case of Tunisia. Journal of Banks and Bank Systems, 8 (4).47-54.
Bariweni, B. (2019) Capital Structure and the shareholders’ value of commercial banks in Nigeria. European Journal of Business and Management Research., 4, (5), 1-18.
Dare, F.D. & Sola, O. (2010). Capital Structure and Corporate Performance in Nigeria Petroleum Industry: Panel Data Analysis. Journal of Mathematics and Statistics, 6(2). 168-173.
Eniola, O. J., Adewunmi, A. A. &Akinselure, O. P. (2017). Impact of Capital Structure on the Profitability of Selected Quoted Banks in Nigeria.An International Journal of Economics, Commerce and Management, 5(1), 543-552
Farah, N., Farrukh, I.&Faizan, N. (2016).Financial performance of firms; evidence from Pakistan cement industry. Journal of Teaching and Education, 05(01), 123-137.
Khan, A.G. (2012).The relationship of capital structure decision with firm performance: A study of the engineering sector of Pakistan. International Journal of Accounting and Financial Reporting, 2(1), 305-360.
Kachollom, P. W. Dasuki, S. I. & Yusuf, M. (2017), Effect of capital structure on the performance of deposit money banks. An International Journal Acounting and Finance Review, 1 (1), 12-23.
Ldama, J. (2016).Financial Management. 2nd edition. Kaduna. Pyla-Mark Publishers.
Miller, M. (1977).Debt and taxes. Journal of Finance, 32 (2), 262-275.
Modigliani, F., & Miller, M. (1958).The cost of capital, corporation finance, and the theory of investment. American Economic Review, 48, 261- 297.
Modigliani, F.F. & Miller, M.H., (1963). Corporation income taxes and the cost of capital: a correction. American Economic Review, 53(3,) 433-443.
Muhammed, A.Ashenafi, B. &Netsanet, S. (2015). Does capital structure matter on performance of banks? (a study on commercial banks in Ethiopia).International Journal of Scientific and Research Publications, 5 (12), 2250-3153
Myers, S.C. &Majluf, N.S. (1984).Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13(2), 187-221.
Nwude, E. C. &Anyalechi, K. C. (2018).Impact of capital structure on performance of commercial banks in Nigeria. International Journal of Economics and Financial Issues, 8 (2),298-303.
Ogebe, O., Ogebe, J.&Alewi, K.(2013).The impact of capital structure on firm's performance in Nigeria. Munich Personal RePEc Archive (MPRA) Paper No.46173
Pouraghajan, A. &Malekian, E. (2012).The relationship between capital structure and firm performance evaluation measures: evidence from the Tehran stock exchange Abbasal. An International Journal of Business and Commerce, 1(9), 166-181.
Pouraghjan, A., Tabari, Y.N.A., Ramezani, A., Mansourinia, E. &Emmagho Lipour, M. (2010).capital structure and bank performance: evidence from Subsahara Africa. European Journal of Accounting Auditing and Fianace Research, 3(3), 1-20.
Sadiq, A. I., Kachollom, P. W.,Dasuki, S.I.& Yusuf, D. (2017).Effect of capital structure on the performance of deposit money banks. International Journal of Accounting & Finance Review, 1(1),12-23.
Serwadda, I. (2019). Effects of capital structure on banks’ performance, the Ugandan Perspective. ActaUniversitatis Agriculture etStiviculturaemendelianaeBrunensis 67, (3), 853-868.
Skopljak, V. (2012).Capital structure and firm performance in financial sector: evidence from Australia.Asian Journal of Finance and Accounting, 4 (1), 278 -298.
Tabachnick, B. G., &Fidell, L. S. (2007).Using multivariate statistics(5th ed.). Boston, MA: Allyn and Bacon.
Umar, M., Tanveer,Z,.Aslam, S. &Sajid, M. (2012). Impact of capital structure on firms’ financial performance: evidence from Pakistan. Journal of finance and accounting, 3 (9), 1-13.
Refbacks
- There are currently no refbacks.
Copyright (c) 2020 Sanusi Bello (PhD); Stephen Pembi; Vivi Peter Vandi
ISSN (PRINT): 2682 - 6135
ISSN (ONLINE): 2682 - 6127
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.