Capital Structure and Organizational Performance in the Nigerian Banking Industry
Keywords:
Finance, Capital Structure, Theory of Capital StructureAbstract
This study examines the impact of capital structure on the Nigerian banking industry from 2000 to
2022 using Ordinary Least Square analysis. A popular method for calculating the coefficients of
linear regression equations that depict the connection between one or more independent
quantitative variables and a dependent variable is called ordinary least squares regression (OLS)
(simple or multiple linear regression). The study's two specific objectives are to investigate the
impact of bonds, preference shares, common shares, and debentures on profit after tax (PAT) and
the link between capital structure and bank performance. The positive connection between Bonds
and PAT is significant even if the exact cause of the link is still unclear since it suggests that PAT
increases proportionately to increasing Bonds. More investigation is necessary, however, since the
effect of preference shares on PAT has a low degree of statistical validity. The observed positive
relationship between Ordinary Shares and PAT underscores the need for cautious inference
regarding causation, given the potential complexities involved. It is imperative to conduct data
analysis with meticulous care, especially considering the robust linear connection between
debentures and PAT. Granger causality tests reveal temporal dynamics, suggesting the presence of
reciprocal effects and predictive modeling opportunities. Consequently, efforts to bolster trade
flexibility, promote meticulous data interpretation, and inform banking strategy decisions emerge
as key outcomes. However, to fully grasp the intricate connections between capital structure and
bank performance in Nigeria, further research employing varied methodologies and extended
timeframes is essential.
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