Impact of Capital Structure on Profitability of Commercial Bank in Nigeria

Student: Khadijat Aladuke GANIYU (Project, 2025)
Department of Accountancy
Osun State Polytechnic, Iree, Osun State

Abstract

The purpose of this paper is to examine the effect of capital structure on bank’s performance in Nigeria using key variables such as return on assets (ROA)and return on equity (ROE), leverage, interest on debt, tax liabilities and market turnover of the selected banks in Nigeria. Five banks were selected from the Nigerian Stock Exchange to carry out the empirical analysis. Both statistical and econometric tools were employed in the analysis using data obtained from the Nigerian stock exchange for the period 2015 to 2019. The Ordinary Least squares estimations were employed in the estimation of the models. Results from the empirical analysis show that a rather unclear relationship exists between firm capital structure and its performance. Specifically, findings show that a bank’s capital structure or leverage has a significant positive effect on its return on capital employed. And that firm leverage, which is a measure of capital structure, has a significant positive impact on its return on equity. Also bank leverage has a significant negative impact on its return on asset. Finally, bank’s capital structure has a pervasive impact on its performance.

Keywords
Capital structure Bank performance Return on Assets Return on equity and Nigeria
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