BANKS' CAPITAL STRUCTURE AND FINANCIAL PERFORMANCE: DOES DYNAMIC INFLUENCE HOLD IN NIGERIA?

A. A. OKWOLI, U. E. OKI, A. S. YUNISA,

Abstract


The paper empirically examined the effects of capital structure on the financial performance of Deposit Money Banks in Nigeria. Specifically, the study examined the effects of a bank's capital structure on its earnings in Nigeria. The study adopts a causal research design and content analysis to obtain secondary data from the audited annual reports of the fourteen (14) sampled banks for the period 2005 - 2014. Data collected was analyzed using a combination of inferential and descriptive statistics. The static model was analyzed using the ordinary least square statistical techniques vide STATA Window 13, while the short-run and long-run relationships were analyzed using the Johansen- Fishers Panel Co integration and the Vector Error Correction Mechanism tests vide the E-view version 8. Findings show that the level of debt in the capital structures of sampled banks has significant inverse relationship with their earnings. Secondly, the results indicate result a long-run causality flowing from the level of debt in a bank's capital structure to its earnings. The study recommends that bank managers need to adopt a target capital structure which will enable them to maximize the wealth of shareholders as well as enhance the stability and safety of depositors' funds.

Keywords


Capital Structure, Bank Financial Performance, Earnings, Dynamic Influence

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International Journal of Management Science Research ISSN ISSN 2536 – 605X(Print)

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