scholarly journals The Effects of Capital Structure on Banks’ Performance, the Ugandan Perspective

2019 ◽  
Vol 67 (3) ◽  
pp. 853-868
Author(s):  
Isah Serwadda
Keyword(s):  
Capital Structure ◽  
Positive Relationship ◽  
Negative Relationship ◽  
Bank Performance ◽  
Short Term ◽  
Return On Assets ◽  
Total Debt ◽  
Net Interest Margin ◽  
Interest Margin

The paper aims to investigate the effects of capital structure on banks’ performance on Ugandan banks for a ten years period, 2006–2015 with a sample of 20 commercial banks. The study employs four performance indicators of return on equity, return on assets, net interest margin and cost to income ratio to determine bank performance. Panel regression models are used to determine the effects of capital structure on bank performance. Independent variables are sub‑divided into capital structure variables namely; long‑term debt to total assets, short‑term debt to total assets and total debt ratio and then control variables are bank size and tangibility of assets. Results portray that there is a positive relationship between capital structure variables and bank performance. It’s between long‑term debts, total debt with net interest margin. There is also a positive relationship between total debt and return on assets. It is still the same between total debt and returns on equity. However, there is a negative relationship between short‑term debt and return on assets. The results also signify a positive relationship between bank size and net interest margin. It is still the same between bank size and returns on equity plus return on assets. There is a negative relationship between the tangibility of assets and net interest margin. It is also the same with return on equity. The findings propose that profitable banks rely more on debt financing as their financing option. This is advanced by the fact that approximately 68 % of total assets are represented by short‑term debts for Uganda’s commercial banks. This further implies that Ugandan banks largely depend on short‑term debt financing for their business operations compared to long‑term debt. Hence the study recommends that executive banking management teams plus policymakers should design prudent financing decisions aimed at reducing overreliance on debts to yield optimal capital structure levels. This will enable banks to remain at the top of the profitability game competitively in the banking industry.

scholarly journals Capital Structure and The Profitability of Listed Retail Firms

2018 ◽  
Vol 10 (1(J)) ◽  
pp. 171-181
Author(s):  
Jason Stephen Kasozi
Keyword(s):  
Capital Structure ◽  
Negative Relationship ◽  
Order Theory ◽  
Debt Financing ◽  
Retail Sector ◽  
Short Term ◽  
Return On Assets ◽  
Pecking Order Theory ◽  
Policy Interventions

The South African retail sector continues to experience a decline in sales and returns amidst growing external competition and a drop in consumer confidence stemming from the recent credit downgrades in the country. Yet, firms in this sector appear to maintain high debt to equity levels. This study investigated whether the capital structure practices of these firms influence their profitability. A Panel data methodology, using three regression estimators, is applied to a balanced sample of 16 retail firms listed on the Johannesburg Securities Exchange (JSE) during the period 2008-2016. The analysis estimates functions relating capital structure composition with the return on assets (ROA). Results reveal a statistically significant but negative relationship between all measures of debt (short-term, long-term, total debt) with profitability, suggesting a possible inclination towards the pecking order theory of financing behaviour, for listed retail firms. Additionally, retail firms are highly leveraged yet over 75% of this debt is short-term in nature. Policy interventions need to investigate the current restrictions on long-term debt financing which offers longerterm and affordable financing, to boost returns. While this study’s methodology differs slightly from earlier studies, it incorporates vital aspects from these studies, and simultaneously specifies a possible model fit.  This helps to capture unique but salient characteristics like the transitional effects of debt financing on firm profitability.  It therefore delivers some unique findings on the financing behaviour of retail firms that both in form policy change, while stimulating further research on the phenomenon. 

scholarly journals Debt Financing and Firm Performance: Evidence from an Emerging South-Asian Country

2019 ◽  
Vol 10 (1) ◽  
pp. 40
Author(s):  
Mohammad Mazibar Rahman ◽  
Umme Khadija Kakuli ◽  
Shahnaz Parvin ◽  
Ayrin Sultana
Keyword(s):  
Firm Performance ◽  
Capital Structure ◽  
Financial Performance ◽  
Negative Influence ◽  
Short Term ◽  
Return On Assets ◽  
Return On Equity ◽  
Firm Financial Performance ◽  
Total Debt

This paper aims to empirically investigate the impact of capital structure choice on the firm performance of the firms listed under the Dhaka Stock Exchange of Bangladesh. Multiple regression has been employed in this research to determine the relationship between the capital structure and the firm’s financial performance. Three ratios of financial performance, i.e., return on assets, return on equity, and gross margin, have been used as a sample of non-financial Bangladeshi companies, selected from 2010 to 2015. The study records numerous findings. First, the result shows a significant negative influence of long-term debt (LTD) and total debt (TTD) on firm financial performance measured by return on assets (ROA), but no significant relationship is found between short-term debt (STD) and this measure of firm’s financial performance. Moreover, the research found that there is no significant effect of short-term debt, long-term debt and total debt on the firm financial performance measured by return on equity (ROE). Finally, the result shows that a significant negative influence of short-term debt and total debt on firm performance measured by GM, but no significant relationship was found between long-term debt and financial performance. In general terms, the results of this study may suggest that capital structure has a negative influence on firms’ financial performance in Bangladesh.

scholarly journals CAPITAL STRUCTURE AND BANK PERFORMANCE OF ISLAMIC AND COMMERCIAL IN YEMEN

2021 ◽  
Vol 9 (12) ◽  
pp. 39-49
Author(s):  
Samer Ahmed Ali Assirri ◽  
C.K. Hebbar
Keyword(s):  
Capital Structure ◽  
Banking Sector ◽  
Positive Impact ◽  
Bank Performance ◽  
Short Term ◽  
Return On Assets ◽  
Return On Equity ◽  
Independent Variables ◽  
Total Debt ◽  
The Impact

This study aims to examine the impact of capital structure on bank performance. This research verified the existence of several relationships between capital structure as measured by LAR, EAR, and Total Debt ratio on bank’s performance as measured by ROA and ROE, EPS, and NPM. Using the panel data of bank from 2010 to 2019, In Islamic banks , the results of the present study revealed that the contributions of the capital structure to ROA were significant. This result was in line with the findings of the past studies. For instance, El-Chaarani and El-Abiad (2019) found that positive and significant impacts of short-term debt and total debt on the return on equity of the banking sector in Middle East region, a negative and significant impacts of short-term debt and total debt on the return on assets, and a positive impact of long-term debt on the return on assets ratio. In commercial banks sector the regression analysis revealed that the contributions of the three independent variables to the EPS were non-significant. Also, the contributions of the total debt and LAR to the independent variables ROE were significant. In contrast, the contribution of the EAR to the independent variable ROE was non-significant. Moreover, the contribution of the LAR to NPM was significant. Also, the contributions of the EAR and the total debt to NPM were non-significant. Furthermore, the contributions of the LAR and EAR to ROA were significant. In contrast, the contribution of the total debt to ROA was non-significant. In general, the contributions of the LAR and EAR to ROA were significant.

scholarly journals Capital Structure and The Profitability of Listed Retail Firms

2018 ◽  
Vol 10 (1) ◽  
pp. 171
Author(s):  
Jason Stephen Kasozi
Keyword(s):  
Capital Structure ◽  
Negative Relationship ◽  
Order Theory ◽  
Debt Financing ◽  
Retail Sector ◽  
Short Term ◽  
Return On Assets ◽  
Pecking Order Theory ◽  
Policy Interventions

The South African retail sector continues to experience a decline in sales and returns amidst growing external competition and a drop in consumer confidence stemming from the recent credit downgrades in the country. Yet, firms in this sector appear to maintain high debt to equity levels. This study investigated whether the capital structure practices of these firms influence their profitability. A Panel data methodology, using three regression estimators, is applied to a balanced sample of 16 retail firms listed on the Johannesburg Securities Exchange (JSE) during the period 2008-2016. The analysis estimates functions relating capital structure composition with the return on assets (ROA). Results reveal a statistically significant but negative relationship between all measures of debt (short-term, long-term, total debt) with profitability, suggesting a possible inclination towards the pecking order theory of financing behaviour, for listed retail firms. Additionally, retail firms are highly leveraged yet over 75% of this debt is short-term in nature. Policy interventions need to investigate the current restrictions on long-term debt financing which offers longerterm and affordable financing, to boost returns. While this study’s methodology differs slightly from earlier studies, it incorporates vital aspects from these studies, and simultaneously specifies a possible model fit.  This helps to capture unique but salient characteristics like the transitional effects of debt financing on firm profitability.  It therefore delivers some unique findings on the financing behaviour of retail firms that both in form policy change, while stimulating further research on the phenomenon. 

scholarly journals Determinants of Capital Structure of Agricultural Firms in Kenya

2017 ◽  
Vol 13 (7) ◽  
pp. 277 ◽  
Author(s):  
John Brian Kinyua ◽  
Peter W Muriu
Keyword(s):  
Capital Structure ◽  
Positive Relationship ◽  
Negative Relationship ◽  
Positive Influence ◽  
Annual Data ◽  
Short Term ◽  
Fixed And Random Effects ◽  
Micro Level ◽  
Negative Link

This paper contributes to the capital structure literature by investigating the determinants of capital structure of agricultural firms in Kenya, using annual data for the period 2010-2015. An empirical model to analyze the determinants was specified and estimated using both fixed and random effects estimation techniques. The estimation results provide evidence that profitability, liquidity, age and size of the firm are significant determinants of capital structure. Specifically, the results reveal a negative relationship between profitability and long term debt and a positive relationship between age of the firm and long term debt. We also established a positive influence of age on short term debt, while a negative link is evident between liquidity, the size of the firm and short term debt. The evidence adduced is important for forming credit markets policies for agricultural firms both at the macro and the micro level.

scholarly journals Capital Structure and Firm Performance: Evidence from Malaysian Public Listed Plantation Companies

2021 ◽  
Vol 5 (1) ◽  
pp. 123-142
Author(s):  
Kim Foong Jee ◽  
Jia En Joanne Ngui ◽  
Pei Pei Jessica Poh ◽  
Wai Loon Chan ◽  
Yet Siang Wong
Keyword(s):  
Firm Performance ◽  
Capital Structure ◽  
Significant Relationship ◽  
Firm Growth ◽  
Control Variable ◽  
Short Term ◽  
Total Debt ◽  
And Performance ◽  
The Impact

This paper examines the relationship between capital structure and performance of firms. The study is confined to plantation sector companies in Malaysia and is based on a sample of 39 firms which listed in Bursa Malaysia for the period from 2009 to 2019. This study uses two performance measures which are ROA and ROE as the dependent variable. Besides, the capital structure measures are the short-term debt, long-term debt, total debt and firm growth, which as the independent variables. Size will be the control variable in this study. Moreover, a fixed-effect panel regression analysis has been used to analyse the impact of capital structure on firm performance. The results indicate that firm performance, which is in term of ROA, have an insignificant relationship with short-term debt (STD) and long-term debt (LTD). For the total debt (TD) and growth, there is a significant relationship with ROA. However, for the performance measured by ROE, it has an insignificant relationship with short-term debt (STD), long-term debt (LTD) and total debt (TD). Furthermore, there is a significant relationship between the growth and the performance firms from plantation sector in Malaysia.

Does Ownership Structure Influence Bank Performance?: Evidence from an Emerging Economy

2018 ◽  
Vol 17 (2_suppl) ◽  
pp. S282-S297 ◽  
Author(s):  
Brijesh K Mishra ◽  
L. V. Ramana
Keyword(s):  
Data Analysis ◽  
Panel Data ◽  
Ownership Structure ◽  
Commercial Banks ◽  
Panel Data Analysis ◽  
Emerging Economy ◽  
Bank Performance ◽  
Return On Assets ◽  
Net Interest Margin ◽  
Interest Margin

Banks’ ownership and their performance form two important dimensions of the entire gamut of banking function. This article strives to establish a link between the two by studying commercial banks in India. Conducting a panel data analysis of 89 commercial banks over the period from 2008–2009 to 2012–2013, one could observe that ownership indeed mattered when net interest margin (NIM) or per-employee profitability was considered, but when return on assets (ROA) was considered, there was not much of a difference among banks when differentiated on ownership basis.

scholarly journals Impact Of Firm Specific Factors On Capital Structure Decision: An Empirical Study Of Albanian Firms.

2013 ◽  
Vol 2 (4) ◽  
pp. 135 ◽  
Author(s):  
Anila Çekrezi
Keyword(s):  
Capital Structure ◽  
Return On Assets ◽  
Balance Sheets ◽  
Listed Firms ◽  
Natural Logarithm ◽  
Total Debt ◽  
Dependent Variables ◽  
Specific Factors ◽  
The Impact

This paper attempts to explore the impact of firm specific factors on capital structuredecision for a sample of 65 non- listed firms, which operate in Albania, over the period2008-2011.In this paper are used three capital structure measures ; short –term debt tototal assets (STDA), long- term debt to total assets (LTDA) and total debt to total assets(TDTA) as dependent variables and four dependent variables: tangibility(TANG),liquidity (LIQ), profitability(ROA=return on assets) and size (SIZE). The investigationuses panel data procedure and the data are taken from balance sheets and include onlyaccounting measures on the firm’s leverage. This study found that tangibility (the ratio offixed assets to total assets), liquidity (the ratio of current assets to current liabilities)profitability (the ratio of earnings after taxes to total assets) and size (natural logarithm oftotal assets) have a significant impact on leverage. Also empirical evidence reveals asignificant negative relation of ROA to leverage and a significant positive relation ofSIZE to leverage. And the second objective of this study is to identify the impact ofindustry classification on firm’s leverage, using a dummy variable for the trade sector. Soone of the hypothesis tested is if financial leverage is independent of industryclassification. Results reveal that long term debt to total assets and total debt to totalassets ratios are significantly different across Albanian industries.

scholarly journals Struktur Pendanaan dan Profitabilitas: Studi pada Perusahaan Non-Keuangan yang Listing di Bursa Efek Indonesia

2019 ◽  
Vol 1 (1) ◽  
pp. 55-66
Author(s):  
Irene Rini Demi Pangestuti ◽  
Dinar Nur Septiyanto
Keyword(s):  
Capital Structure ◽  
Random Sampling ◽  
Stock Exchange ◽  
Sampling Technique ◽  
Short Term ◽  
Return On Assets ◽  
Negative Effect ◽  
Equity Ratio ◽  
Positive Effect

Purpose- The study was conducted to examine the effect of capital structure on profitability. Variables of the capital structure are Long-term Debt to total assets (LTD), Short-term Debt to total assets (STD) and Debt to Equity Ratio (DER) while profitability is proxied by Return on Assets (ROA. Research is conducted on all Non-Financial companies listed on the Indonesia Stock Exchange (IDX) in the period 2014-2016. Methods- Use the Purposive Random Sampling technique to take samples. Samples taken from Bloomberg. The sample used amounted to 175 companies using multiple regression analysis SPSS program assistance. Finding- The results of the study note that LTD and STD have a significant negative effect on ROA. DER has not a significant positive effect on ROA.

scholarly journals Board Characteristics and Capital Structure of Malaysia Consumer Products Sector

2018 ◽  
Author(s):  
Kuah Yoke Chin ◽  
Zuriawati Zakaria
Keyword(s):  
Capital Structure ◽  
Capital Expenditure ◽  
Negative Influence ◽  
Consumer Products ◽  
Debt Financing ◽  
Short Term ◽  
Board Characteristics ◽  
Total Debt ◽  
Malaysian Consumer

This study investigated the relationship between board characteristics and capital structure, namely total debt, short-term debt, and long-term debt of firms in the Malaysian consumer products sector for the period 2010 to 2014. Based on 109 firms selected for the study, the firms’ decision about capital structure regardless of total debt, short-term debt or long-term debt is not influenced by the size of the board. However, if the board membership constitutes more independent directors, the proportion of short-term debt is even higher than the long term-debt. Board meetings were found to have a significantly negative influence on firms’ decisions concerning total debt financing. The findings also revealed that large firms hold more short-term and long-term debts when there is an increase in the number of members on the board. The firms that have been long in existence focused more on short-term debt financing and their growth in terms of capital expenditure. Consequently, the total debt of the firms also increased.

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