The impact of capital structure on financial performance of the listed deposit money banks: evidence from Nigeria

Abstract

This paper has empirically assessed the impact of capital structure on financial performance of Deposit Money Banks in Nigeria, seven banks out of twenty one was selected for the study and the selection of these banks was made based on the consistent management policies. The empirical analysis covered the period of ten years from 2007 to 2016. The data for the study were obtained from secondary sources including the annual reports and accounts of the selected banks and linear regression statistical tool was used and the study revealed that only Returns On Equity (ROE) which is one of the components of banks’ financial performance has significant positive impact on capital structure, which is an indication that these banks have more equity capital than debt and it’s also an indication that banks with more equity capital are perceived to have more safety and such merit can be translated into higher profitability. Based on the findings, it was recommended that there should be a constant review of minimum capital requirement of deposit money banks in Nigeria to the optimal level by the apex bank. The management of the banks should constitute a strong team that would effectively manage their assets and increase it to the optimal level. This will in turn help the public to maintain confidence in the banks and also accommodate the daily needs of customers. The study also recommends that further researchers can study other variables such as working capital management, Customer satisfaction and Corporate Governance and their impact on financial performance of listed deposit money banks on the Nigeria Stock Exchange.