Capital Structure and Profitability in Srilankan Banks
Capital structure has attracted intense debate and scholarly attention across industries in the corporate finance literature over the past decades. Nonetheless, in the context of the banking industry, the subject has received a limited research attention. Capital structure decision is the vital one since the profitability of an enterprise is directly affected by such decision. Hence, proper care and attention need to be given while determining capital structure decision. The study investigated the impact of capital structure on profitability of ten listed Srilankan banks over the past 8 year period from 2002 to 2009.Basedon the findings of the study, there are a few key points that can be used to conclude this study. It is very important that the total debt is the determining factor of profitability in the Banking Industry of Sri Lanka. The outcomes of the study may guide banks, loan-creditors and policy planners to formulate better policy decisions as far as the capital structure is concerned. Further, the study reinforces and refines the body of knowledge relating to capital structure and profitability in Srilankan Banks.
