CAPITAL STRUCTURE IMPACT ON THE PERFORMANCE OF BANKING INDUSTRY IN NIGERIA

ABSTRACT

This study examines the impact of capital structure on the performance of the banking industry in Nigeria. The objective of the study was to examine the effect of total debt on the bank profitability and also to determine the impact of equity on the profitability of the bank. The focus of this study is on five (5) selected bank comprising of first bank, sterling bank, United bank for Africa, Access bank and guaranty trust bank (GTB), Secondary data were source of data collection for this study, and the data were gotten from the annual reports of the selected banks from 2009 to 2013. The quantitative survey research design was the research design adopted for this study. The regression analytical technique was used to analyze and test the stated hypothesis. The findings revealed that there is no significant relationship between total debt of the and the return on asset of the bank, and also, the equity was observed to have no significant relationship with the return on equity of the banks. It was concluded that short-term debt and long-term debt does not have a significant impact on the return on asset of the banks. Also, the study concludes that the equity of the banks does not have a positive relationship with the performance of the banking industry (ROE). 

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

1.2    STATEMENT OF THE PROBLEM

Every investment decision taken by the manager affects the performance of the banks. What percentage of the capital should be debt and what percentage should be equity so as to maximize profitability of the bank given that each source of finance has a cost-benefit attach to it, is a major managerial decision. The difficulties associated with designing an optimum capital structure policies to enhance profitability is the reason why this study sought to examine whether capital structure affect banks’ performance concentrating on five (5) selected banks, First Bank, Sterling  Bank, Guarantee Trust Bank, United Bank for Africa and Access Bank. The study, therefore, attempts to address the capital structure puzzle using data from the Nigerian quoted banks.