DETERMINANTS OF CAPITAL STRUCTURE OF NEPALESE COMMERCIAL BANKS

Abstract

This study is examined to determinants of capital structure of Nepalese commercial banks. The main objectives of this study are to examine the current status of capital structure and profitability of Nepalese commercial banks, to analyze the relationship between capital structure and profitability of Nepalese commercial banks and to analyze the impact of how capital structure affects the firm profitability of the commercial banks in Nepal. Debt Equity Ratio (D/E), Loan and Advance to Deposit Ratio (LATDR), Deposit Ratio (DR), Total Debt Ratio (TDR) and Bank Size (Size) are the independent variables and Return on Equity (ROE) is the dependent variable in this study. Mean, standard deviation, correlation and multiple regression analysis are taken to present data. The major finding of this study was the correlation matrix highlights some interesting relationships between other financial metrics. For instance, there is a strong positive correlation between Size and ROE, indicating that larger in commercial banks tend to achieve higher returns on equity, possibly due to economies of scale or greater market power. Additionally, the matrix reveals significant positive correlations between various debt-related metrics, such as D/E Ratio, LATDR, and TDR. The study specifically focuses on exploring the relationship between Return on Equity (ROE) is the key financial indicators such as Debt Equity Ratio (D/E), Loan and Advance to Deposit Ratio (LATDR), Deposit Ratio (DR), Total Debt Ratio (TDR) and Bank Size of determinants of capital structure of Nepalese commercial banks. In regression analysis, Debt Equity Ratio (D/E), Deposit Ratio (DR), and Bank Size are the positive significant impact on Return on Equity (ROE). Loan and Advance to Deposit Ratio (LATDR) and Total Debt Ratio (TDR) are insignificant impact on Return on Equity (ROE).