CAPITAL STRUCTURE AND FINANCIAL PERFORMANCE OF COMMERCIAL BANK IN NEPAL

Abstract

The financial structure of a business is may be one of its most important considerations. The success of any organization is determined by its capital structure. Financial managers now have more pressure to determine the optimal capital structure that would optimize shareholder value. This study looks at the relationship between capital structure and bank financial performance in Nepal. The debt ratio (DR) is used in the study as a stand-in for a bank's capital structure, and earning per share (EPS), return on equity (ROE), and return on assets (ROA) are used to measure a bank's performance in the nation under investigation. Over a ten-year period, from 2012 to 2022, the study chose five out of the twenty commercial banks, and information was taken from each bank's annual financial statement. To achieve the study's objectives, a descriptive research design was chosen. Additionally, an inferential analysis using statistical tools like regression analysis, correlation analysis, and hypothesis testing was chosen in SPSS to examine the relationship between the dependent and independent variables. The study's other findings indicate that NMB has the lowest level of TDTE and ROE, while Rastriya Banijya Bank Limited has the highest level of TDTA, TDTE, and ROE, indicating that Rastriya Banijya Bank is able to properly utilize its funding sources. Since Nepal Bank Limited has the highest ROA and EPS levels and NMB Bank Limited has the lowest, it has a poorer capital composition trade-off between risk and return than other banks. Lastly, compared to other commercial banks in the sample, Everest Bank Limited has the greatest level of CAR.