CAPITAL STRUCTURE AND PROFIT PERFORMANCE OF NIGERIA'S TOP FIVE PUBLICLY LISTED DEPOSIT MONEY BANKS (2003 – 2022)
Keywords:
Capital Structure. Debt financing, equity financing, banks NigeriaAbstract
The research investigated the effect of capital structure on the profit performance of Nigeria's top five publicly listed banks. The ex-post facto design method was used in this study while secondary data were used were gathered from annual reports from top five publicly listed banks (Zenith Bank, Guaranty Trust Bank, First Bank of Nigeria, Eco Bank Nigeria and Access Bank ) which are among those rated by the Central Bank of Nigeria covering a period of 20 years (2003–2022). Pooled Panel Least Squares Regression was employed as a statistical method with aid of STATA 15 software. Result indicates that EQR exert a negative but non-significant effect on the ROA of the banks of study with regression coefficient of -40.89 and p-value of -1.8584 However, ICR exert negative and significant effect on ROA of the banks with correlation coefficient of -.000204 and p-value of .00180 which is less than 0.05. To that effect the alternative hypothesis which states that ICR has significant effect on ROA is accepted. This implies that a unit increase in ICR would bring about -.0002 reduction in the ROA of the banks. Furthermore, DTR, LEV and DER all have positive but non-significant effect on ROA of the banks. From the result of the analysis, the study concludes that capital structure elements have varied effect on ROA of banks of study most of which were non-significant. The study recommends that banks should rely mostly on equity financing as the debt financing has negative effect on the financial performance of the firms as EQR, DER and ICR show negative effect of debts on the financial performance of banks. The interest coverage ratio, which shows the rate of income relative to interest adversely affect the firms.
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