The Impact of Capital Structure on Financial Performance of Commercial Banks in Ethiopia

Mathewos Woldemariam Birru

The Impact of Capital Structure on Financial Performance of Commercial Banks in Ethiopia

Mathewos Woldemariam Birru * § M.sc. in accounting and finance

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§ Jimma University.

The Impact of Capital Structure on Financial Performance of Commercial Banks in Ethiopia

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Abstract

Capital structure decisions are among the most important and crucial decisions for any business because of their effect on the performance of firms. The purpose of this paper was to investigate the impact of capital structure on financial performance of selected commercial banks in Ethiopia over the past five (5) year period from 2011 to 2015 using secondary data collected from financial statements of the commercial banks. Data was then analyzed on quantitative approach using multiple regression models. The study used two accounting-based measures of financial performance (i.e. return on equity (ROE) and return on assets (ROA)) as dependent variable and five capital structure measures (including debt ratio, debt to equity ratio, loan to deposit, bank’s size and asset tangibility) as independent variable. The results indicate that financial performance, which is measured by both ROA, is significantly and negatively associated with capital structure proxies such as DER, SIZE and TANG whereas DR have negative impact.

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Funding

No external funding was declared for this work.

Conflict of Interest

The authors declare no conflict of interest.

Ethical Approval

No ethics committee approval was required for this article type.

Data Availability

Not applicable for this article.

How to Cite This Article

Mathewos Woldemariam Birru. 2016. "The Impact of Capital Structure on Financial Performance of Commercial Banks in Ethiopia". Global Journal of Management and Business Research - C: Finance GJMBR-C Volume 16 (GJMBR Volume 16 Issue C8).

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GJMBR Volume 16 Issue C8

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Journal Specifications

Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

Keywords

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Classification

GJMBR-C Classification JEL Code: G21

Submission ReceivedDecember 16, 2015
Peer Review Double Blind
Handling Editor
Accepted January 3, 2016
Published January 15, 2016

Version of record

v1.2

Issue date

December 10, 2016

Language

English

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Article Matrices

Total Score: 118

Country: Ethiopia

Subject: Global Journal of Management and Business Research

Authors: Mathewos Woldemariam Birru (PhD/Dr. count: 0)

View Count (all-time): 300

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Publish Date: 2016 01, Fri

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