The Impact of Changes in the Capital Structure on the Financial Performance of UK Commercial Banks
Case of Lloyds Bank, HSBC Bank and Barclays Bank
Keywords:
Capital Structure, Financial Performance, Fundamental Value, Shareholders' WealthAbstract
The purpose of this study was to establish the impact of changes in the capital structure on the financial performance of UK commercial banks. HSBC, LLOYDs and Barclays were selected as appropriate samples. The time period for this study was between 2010 and 2023. Pearson Correlation Coefficient and Random Effect Panel Regression were the primary analytical methods. Measured variables included debt-equity ratio, debt-capital ratio and net profit margin. The findings revealed that there exists a weak negative correlation between changes in the capital structure and financial performance of UK commercial banks. The correlation was found out to be statistically significant. Lastly, it was established that any increase in debt-equity ratio leads to decrease in the net profit margin by 5.61%. At the same time, any increase in the debt-to-capital ratio leads to decrease in the net profit margin by 1.17%.
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