DETERMINANTS OF CAPITAL STRUCTURE OF NEPALESE COMMERCIAL BANKS

Abstract

This research investigates the determinants of capital structure in Nepalese Commercial Banks, using secondary data from four banks, resulting in 40 observations spanning from 2013/14 to 2022/23. Dependent variables include the total debt to total assets and total debt to total equity, while independent variables are return on assets, bank size, assets tangibility, assets growth, and liquidity. Data were sourced from the annual reports of the selected banks. Pearson's correlation coefficients and regression models were used to evaluate the significance and impact of specific bank factors on the capital structure of these banks. The findings reveal that bank size and assets tangibility are positively correlated with total debt to total assets, whereas return on assets and assets growth are negatively correlated with total debt to total assets. Additionally, return on assets, bank size, assets tangibility, and assets growth are negatively correlated with total debt to total equity. This indicates that higher assets growth and return on assets are associated with lower total debt to total assets and total debt to total equity, whereas larger bank size and greater assets tangibility are associated with higher total debt to total assets. The study concludes that return on assets, bank size, and assets tangibility are the most influential factors, while assets growth is the least influential factor affecting the capital structure of Nepalese commercial banks.