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

Purpose: The basic aim of this study is to investigate how capital structure influences the performance of firms from textile sector listed at Pakistan Stock Exchange, taking liquidity of the firms as a moderator. Methodology: Data of 30 listed textile firms is taken from their financial statementsfor a period of ten years from 2007 to 2016.Analysis has been conducted using the Ordinary least square (OLS) regression. Two measures of capital structure (debt ratio and debt-to-equity ratio) have been used to find out its impact on three performance measures (return on assets, return on equity, and earnings per share). Findings: The variable, total debt ratio does not have any significant effect on all the three firm performance measures (return on asset, return on equity and earnings per share). Debt-to-equity ratio variable also does not have a significant impact on two firm performance measures (ROA and ROE). It however has a significant, negative impact on EPS. In case of liquidity as a moderator, it is found that liquidity acts as the significant moderator between the debt ratio and return on assets whereas liquidity factor is significant in case of relation between debt –to-equity variable and two performance variables return on assets and earnings per share.. Practical implications: Practically this study is important from managerial perspective as the appropriate decision for choosing a level of capital structure vis-à-vis total assets and total equity is essential for the better performance of the firms.

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IMPACTS OF E-BANKING ON PERFORMANCE OF BANKS IN A DEVELOPING ECONOMY: EMPIRICAL EVIDENCE FROM BANGLADESH

Journal of Business Economics and Management ◽

10.3846/16111699.2015.1068219 ◽

2016 ◽

Vol 17 (6) ◽

pp. 1066-1080 ◽

Cited By ~ 2

Author(s):

Md. Nur Alam SIDDIK ◽

Gang SUN ◽

Sajal KABIRA ◽

Joghee SHANMUGAN ◽

Cui YANJUAN

Keyword(s):

Negative Impact ◽

Empirical Studies ◽

Time Lag ◽

Least Square ◽

First Year ◽

Policy Makers ◽

Return On Equity ◽

Ordinary Least Square ◽

Net Interest Margin ◽

The Impact

E-banking has become one of the most popular methods of banking that has experienced a considerable expansion during the last few years. However, there is relative dearth of empirical studies examining the impact of e-banking on performance of banks. Though e-banking is gaining acceptance in Bangladesh, impact of e-banking on bank’s performance is yet to be established. This paper fills this gap. Using panel data of 13 banks over the period of 2003–2013, this study empirically investigated the impact of e-banking on the performance of Bangladeshi banks measured in terms of Return on Equity, Return on Assets and Net Interest Margin. Results from pooled ordinary least square analysis show that e-banking begins to contribute positively to banks’ Return on Equity with a time lag of two years while a negative impact was found in first year of adoption. Empirical findings of this study is of greater significance for the developing countries like Bangladesh because it will invoke the attention of the bank management and policy makers to pursue such policies to expand e-banking. This study also contributes to empirical literatures by reconfirming (or otherwise) findings of previous studies.

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

Finance and Market ◽

10.18686/fm.v0.1103 ◽

2018 ◽

Author(s):

Merve Tuncay

Keyword(s):

Capital Structure ◽

Financial Performance ◽

Capital Adequacy ◽

Return On Assets ◽

Control Variables ◽

Return On Equity ◽

Independent Variables ◽

Earnings Per Share ◽

Asset Quality ◽

The Capital Structure

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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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

Asian Journal of Finance & Accounting ◽

10.5296/ajfa.v9i2.12076 ◽

2018 ◽

Vol 9 (2) ◽

pp. 369

Author(s):

Shireen Mahmoud AlAli

Keyword(s):

Capital Structure ◽

Financial Performance ◽

Stock Exchange ◽

Return On Assets ◽

Return On Equity ◽

Industrial Companies ◽

Earnings Per Share ◽

Amman Stock Exchange ◽

The Impact ◽

The Capital Structure

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

Finance and Market ◽

10.18686/fm.v4i1.1103 ◽

2019 ◽

Vol 4 (1) ◽

pp. 17

Author(s):

Merve Tuncay

Keyword(s):

Capital Structure ◽

Financial Performance ◽

Capital Adequacy ◽

Return On Assets ◽

Control Variables ◽

Return On Equity ◽

Independent Variables ◽

Earnings Per Share ◽

Asset Quality ◽

The Capital Structure

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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Performance: Empirical Evidence From Malaysian Banking Industry

Journal of Public Administration and Governance ◽

10.5296/jpag.v9i3.15104 ◽

2019 ◽

Vol 9 (3) ◽

Author(s):

Nazaria Md Aris ◽

Suzila Mohamed Yusof ◽

Lim Jia Wen

Keyword(s):

Corporate Governance ◽

Empirical Studies ◽

Descriptive Analysis ◽

Least Square ◽

Bank Performance ◽

Return On Equity ◽

Ordinary Least Square ◽

Governance Practices ◽

Regression Diagnostic ◽

One Year

Various theories and empirical studies have been applied and proposed to establish and explain how corporate governance practices are related to banks financial performance. This study concerns the relationship between corporate governance variables and bank performance in Malaysia. The data collected and analysed in this research is from quarter one year 2011 to quarter four year 2016. Various determinants have been identified namely return on equity(ROE) for bank performance measurement, CEO duality, board size, and board gender for corporate governance. Control variables are bank size and bank leverage. The methodologies adopted in this research includes descriptive analysis, correlation analysis, Pooled Ordinary Least Square (OLS) regression, Diagnostic Tests (Jarque-Bera Normality Test, Wooldridge Test and Variance Inflation Factor), Breusch-Pagan (BP) Lagrange Multiplier test, and Hausman test. In this study, the findings indicate that strong board composition and bank leverage were experience better performance.

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Financial Leverage and Firms’ Performance: Empirical Investigation of KSE-100 Index

ETIKONOMI ◽

10.15408/etk.v17i1.6102 ◽

2018 ◽

Vol 17 (1) ◽

pp. 45-56 ◽

Cited By ~ 3

Author(s):

Farhan Ahmed ◽

Iqra Awais ◽

Muhammad Kashif

Keyword(s):

Capital Structure ◽

Financial Performance ◽

Stock Exchange ◽

Optimal Level ◽

Annual Data ◽

Financial Leverage ◽

Return On Assets ◽

Return On Equity ◽

Listed Firms ◽

The Impact

Capital generation to fund everyday operations and long-term expansions is a constant concerning element in the corporate world. This study aims to investigate the optimal level of capital structure that firms can adopt to improve their financial performance given the industry dynamics and economic circumstances of the country. Using Hausman’s specification test, annual data for the period 2005 – 2014 of Karachi Stock Exchange (KSE) 100 index listed securities has been collected to analyze the impact of financial leverage on the firms’ performance. Return on assets, return on Equity, and TOBIN’s Q are the proxies of financial performance analyzed against financial leverage for the KSE 100 index listed firms. The finding of the paper indicates that capital structure, leverage, interest cover and sales growth as most significant variables impacting firms’ profitability. DOI: 10.15408/etk.v17i1.6102

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Analisis Pengaruh Return on Assets, Debt to Equity Ratio dan Return on Equity terhadap Earnings Per Share (Studi Empiris pada Perusahaan Sektor Industri Dasar dan Kimia yang Terdaftar di BEI Periode 2014-2018)

Jurnal Manajemen Bisnis dan Kewirausahaan ◽

10.24912/jmbk.v5i3.11859 ◽

2021 ◽

Vol 5 (3) ◽

pp. 255

Author(s):

Sanny Sanny

Keyword(s):

Data Analysis ◽

Stock Exchange ◽

Sampling Technique ◽

Least Square ◽

Return On Assets ◽

Return On Equity ◽

Purposive Sampling ◽

Earnings Per Share ◽

Equity Ratio ◽

Industry Sectors

This study aims to analyze the effect of return on assets, debt to equity ratio, and return on equity to earnings per share. This study took as many as 41 companies in the basic and chemical industry sectors listed on the Indonesia Stock Exchange in the 2014-2018 period determined by purposive sampling technique. Data analysis was performed using the robust least square (RLS) method. The results of the study prove that partially return on assets and return on equity have a significant effect on earnings per share, but the debt to equity ratio has not been able to provide a significant effect on earnings per share. This finding also proves that simultaneous return on assets, debt to equity ratio and return on equity have a significant effect on earnings per share. Penelitian ini bertujuan untuk menganalisis pengaruh return on assets, debt to equity ratio, dan return on equity terhadap earnings per share. Penelitian ini mengambil subjek yaitu sebanyak 41 perusahaan sektor industri dasar dan kimia yang terdaftar di Bursa Efek Indonesia dalam periode 2014-2018 yang ditentukan dengan teknik purposive sampling. Analisis data dilakukan dengan metode robust least square (RLS). Hasil penelitian membuktikan bahwa secara parsial return on assets dan return on equity berpengaruh signifikan terhadap earning per share, namun debt to equity ratio belum mampu memberikan pengaruh yang signifikan terhadan earnings per share. Temuan ini juga membuktikan bahwa secara simultan return on assets, debt to equity ratio dan return on equity berpengaruh signifikan terhadap earning per share.

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Impacts of Capital Structure on Bank Performance

Koya University Journal of Humanities and Social Sciences ◽

10.14500/kujhss.v2n1y2019.pp118-123 ◽

2019 ◽

Vol 2 (1) ◽

pp. 118-123

Author(s):

Sardar SH. Ibrahim

Keyword(s):

Capital Structure ◽

Positive Impact ◽

Least Square ◽

Annual Reports ◽

Bank Performance ◽

Return On Assets ◽

Return On Equity ◽

Probability Of Survival ◽

Total Debt ◽

The Impact

Purpose: This study studies the effect of capital structure on the performance of some Iraqi private banks. Six banks based in Iraq namely: Babylon Bank, Investment Bank, Credit Bank, Commercial Bank, Sharq Al-Awsat Bank, and Baghdad Bank were selected for the present study over the period 2005 to 2015. Methodology: Annual reports of these banks were studied and relevant ratios were calculated. The variables that were identified as independent for capital structure were total debt to capital, bank size and asset growth, while return on assets and return on equity were considered to be dependent variables for bank performance. The panel Least Square model has been used to examine the impact of capital structure on bank performance. Findings: Outcomes indicate that none of the independent variables has a significant impact on return on assets (ROA), while total debt to capital (TDC) has a positive impact on return on equity (ROE). Reduction: Depending on this result, Iraqi banks should keep sufficient amount of capital to avoid any financial risks and increase the probability of survival.

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

Finance and Market ◽

10.18686/fm.v0i0.1103 ◽

2018 ◽

Author(s):

Merve Tuncay

Keyword(s):

Capital Structure ◽

Financial Performance ◽

Capital Adequacy ◽

Return On Assets ◽

Control Variables ◽

Return On Equity ◽

Independent Variables ◽

Earnings Per Share ◽

Asset Quality ◽

The Capital Structure

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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