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THE IMPACT OF CAPITAL STRUCTURE ON THE PERFORMANCE OF BANKING INDUSTRY
Abstract
Capital structure has been found to have impact on bank performance. Bank consolidation in Nigeria has increased bank equity capital against debt. This study aims to determine the impact of capital structure on the performance banking industry. The study used profit after tax as a dependent variable and three capital structure variables (liquidity, interest rate and bond) as independent variables. The sample for the study consists of four (4) Nigerian banks quoted on the Nigerian Stock exchange (NSE) Union Bank, First Bank, UBA, and Zenith Bank and period of nine (9) years from 2006 to 2015. The required data and information for the study were gathered from published annual reports. Ordinary least square regression analysis of secondary data shows that capital structure has a positive relationship with the financial performance of Nigeria quoted banks. This suggests that the management of quoted banks in Nigeria consistently use liquidity, interest rate and debt to improve earnings.
Keywords: Capital structure, debt and equity, financial performance.