Post consolidation assessment of the effect of capital structure on banks’ performance in Nigeria
No Thumbnail Available
Date
2013
Journal Title
Journal ISSN
Volume Title
Publisher
Department of Business Administration, University of Ilorin, Ilorin.
Abstract
This study examines the effect of capital structure of bank performance in post-consolidation era in Nigeria with a view to validate or refute the long standing Modigliani and Miller theory of irrelevance or the Traditional relevance theory. The secondary data used were obtained from annual financial statements over a period of seven (7) years from 2005 to 2011 of the stratified sampled fifteen (15) banks listed on the Nigerian Stock Exchange. A panel regression analysis was applied on Return on Assets (ROA) as performance indicator as well as short term debt ratio (STDTA) and total debt ratio (TDTA) as proxies for capital structure while a 2-tailed t-test was used to test the formulated hypothesis at 5% significance level. The study finds an insignificant negative impact of capital structure (STDTA and TDTA) on bank performance (ROA), a compliance with MM irrelevance theory leading to the acceptance of null hypothesis; that no significant relationship exist between capital structure and bank performance in Nigeria. The study recommends that instead of emphasizing capital structure composition, managerial efficiency must be sought instead, with a view to enhance bank performance/profitability, achieve all-round stake holders satisfaction and engender a more viable and reliable banking sector in the country.
Description
Keywords
consolidation, capital structure, bank performance, capital base
Citation
Olaniyi, T.A., Adeyemi, A.Z. & Oloyin-AbdulHakeem, B.O. (2013): Post consolidation assessment of the effect of capital structure on banks’ performance in Nigeria. Advances in Management. 12 (1); 99-110