Capital Structure and Firm Performance of Commercial Banks in Nepal ( with Reference to EBL, ADBL, NBL & SBI)

Abstract

This study examines the capital structure and Firm Performances in Nepalese Commercial Banks. The study is based on secondary data of 4 commercial banks for the period 2015/16 to 2019/20.The total debt to total assets and total debt to total equity were selected as dependent variables while return on assets, bank size, assets tangibility, assets growth and liquidity are the independent variables. The data were collected from annual reports of concerned sample bank. The Pearson's correlation coefficients and regression models are estimated to test the significance and impact of bank specific factors on the capital structure of Nepalese commercial banks. The result shows that Asset Tangibility, Growth Rate and Liquidity are positively correlated with total debt to total assets whereas return on assets and Company size are negatively correlated with total debt to total assets. Likewise return on assets and Company size are negatively correlated with total debt to total equity. It indicates that higher return on assets and Company size lower would be the total debt to total assets and total debt to total equity. Likewise higher the Asset Tangibility, Growth Rate and Liquidity higher would be the total debt to total assets. This study concludes that assets growth Rate and liquidity are the most influencing factors and return on assets, Company size and assets tangibility least influencing factor affecting the capital structure of Nepalese commercial banks.