EFFECT OF CAPITAL STRUCTURE ON FINANCIAL PERFORMANCE OF SELECTED COMMERCIAL BANK IN NIGERIA

Abstract

This study examined the effect of capital structure on financial performance of Selected Commercial Banks in Nigeria with emphasis on the extent to which debt ratio, equity ratio, and debt equity ratio affect financial performance of commercial banks in Nigeria. The study adopted expost facto research design. Use was made of secondary data obtained from annual report and accounts of selected commercial banks in Nigeria. Panel regression method was used to estimate the variables in addition to the descriptive statistics analysis used carry out to describe ascertain the characteristics of the dependent and independent variables. Findings reveal that debt ratio has negative significant impact on financial performance of selected commercial banks in Nigeria while, equity ratio has positive and significant effect on financial performance. The debt equity ratio also has positive significant impact on financial performance of selected commercial banks in Nigeria. The study consequently recommends that there should be an optimal debt mix that will improve financial performance of commercial in Nigeria. More so, there should be an increase in the level of equity ratio in order to improve on the profitability of commercial banks in Nigeria. Finally, commercial banks in Nigeria should increase the level of debt equity ratio in order to allow a positive liquidity.