The Impact Of Capital Structure On Financial Performance Of Selected Deposit Money Banks (DMBS) In Nigeria
ABSTRACT
The objective of this study was to examine the impact of capital structure on the financial performance of selected listed deposit money banks (DMBs) in Nigeria. Specifically, this study intended to investigate the impact that short term debt to total asset, long term debt to total asset and total debt to total asset individually have on return on assets. Data were extracted from audited annual reports of five selected deposit money banks listed on the Nigerian Exchange Group for five years, 2018-2022 which represented the focus of this study. Using ex-post facto research design, as well as Pearson Correlation Coefficient and multiple regression analysis with the help of e-view 9.0 to test the formulated hypotheses, findings revealed that short term debt to total asset and total debt to total asset have a significantly positive impact on return on assets, while long term debt to total asset does not have a significantly positive impact on return on assets, thereby leading to the conclusion that capital structure has a positive and significant impact on financial performance of the selected listed deposit money banks in Nigeria. On the basis of the findings of this study, it was suggested that, among others, management of the selected banks should consider the use of more debt (that is, should have an optimal perspective for short term debt usage) in their capital structure as this will have an automatic effect of reducing the overall cost of capital.