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Global Academic Journal of Economics and Business
Volume-3 | Issue-01
Original Research Article
Capital Structure and Commerciial Banks’ Profitability in Nigeria
Umoh Emmanuel Alphonsus, Udofia Odudu Obio, Hanson Uwem Effiong, Ekanem Boniface Christopher
Published : Jan. 2, 2021
DOI : 10.36348/gajeb.2021.v03i01.002
Abstract
Abstract: This study was carried out to empirically examine mpact of capital on profitability of commercial banks n Nigeria employing a co-integration approach. Data set used for analysis n this study was extracted from Central Bank Statistical Bulletin of 2019. This study employed, total debt and total equity as proxies for capital structure while Net profit of commercial banks n Nigeria within the scope of this study was adopted as a measure of the performance of commercial banks n Nigeria. Ex-post facto research design was adopted. Data were analyzed by employing ordinary least square regression (OLS) model on a sample of 14 commercial banks n Nigeria from 2008 through 2019; the study found that capital structure positively and significantly mpacted net profit of commercial bank n Nigeria within the period under review. These findings were consistent with trade-off theory of capital structure. Following these findings, the study recommended that since equity accounted for more profit of banks n Nigeria than debt, commercial banks should employ high equity-to-debt ratio n their operations n order to reduce bankruptcy risk and reduce the high gearing associated with banking business and enhance net profit.

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