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.
References
Abdul, S.A. (2022). The capital structure and performance of Nigerian banks. a presentation made in the
Business Administration Department at Bayero University.43–48
Access Bank (2015). Annual Reports retrieved from (www.accessbankplc.com).
Akintoye, I.R (2022). The Nigerian Experience with Capital Structure and Firm Performance. 10:233–43
in European Journal of Economics, Finance, and Administrative Sciences.
Akinyomi, O. J. (2018), Evidence about the effect of capital structure on a firm's performance from a
Nigerian manufacturing business. International Journal of Innovative Research and Studies. 2 (9).
Alfred, D. D. (2013). Corporate Finance: Issues, Investigations, Innovations and Applications.
Lagos: High Rise Publication.
Amman,A. and Shehu, O.(2014).Assessing the Capital Structure of Manufacturing Firms and Profitability
in Contemporary Years. African Journal of Development studies, 2(1), 159164.
Angelo-Masulis, P, (2013). The banking industry, business cycle severity, and likelihood of an economic
downturn. MPRA No. 4953, pages 367–387
Aremu, M. A., Ekpo, I. C. and Mustapha, A.A, (2021). Evidence from the Nigerian banking sector is
presented in the Interdisciplinary Journal of Contemporary Research in Business, 4(9), 155–181,
on the factors that influence banks' profitability in emerging nations.
Asika, N. (2017). Research Methodology: A Process Approach, Lagos: Mukugamu Publishers, Company
Ltd.
Babalola, J.A. (2019). Nigerian Economic Growth and the Development of Capital Structures. Economic
and Allied Field Journal, 2(2), pp. 116–132.
Barclay, M.J. and Smith, C.W. (2020). The Capital Structure Puzzle: The Evidence Revisited. Journal of
Applied Corporate Finance, 17(1).
Bassey, S.N., Aniekan, M., Ikpe, J.I and Udo, T.D (2020).The Effect of Capital Structure on Banking
Reforms Model.Journal of Development Studies.2 (1)
Bokpin, A. G., and Isshaq, Z. (2020).Stock Market Development and Financing Decisions of Listed Firms
in Ghana. African Journal of Business Management.
Booth, L. – Aivazian, V. – Demirguc-Kunt, A. – Maksimovic, V. (2014): Capital Structure in Developing
Countries. Journal of Finance, 56, 87–130.
Chandrasekharan, C. V. (2020). Determinant of Capital Structure in the Nigerian Listed Firms. International
Journal of Advanced Research in Management and Social Sciences, 1(2).
Chaplinsky, G and Niehaus, G, (2018). European Universal Banks: An Overview. International Journal of
Emerging Research in Management & Technology.3 (5): 1-4.
Chaplinsky, S. and Niehaus, G. (2018). The Determinants of inside Ownership and Leverage. Working
Paper, University of Michigan.
Chung, Kee H. (2021). Asset Characteristics and Corporate Debt Policy: An Empirical Test. Journal of
Business Finance and Accounting, 20, 83-98.
Damodaran, (2019). Theory and Practice of Corporate Finance, 2nd Ed. Wiely Publishers, New York.
Diamond Bank, 2015. Annual Reports may be found at www.diamondbank.com.
Dimitris, M. and M. Psillaki (2015). Capital Structure, Equity Ownership and Firm Performance.
Department of Finance, University of Nice-Sophia Antipolis, France.
Eco Bank (2023). Annual Reports retrieved from (www.ecobank.com).
Fama, E. F. and French, K. R. (2013): The Corporate Cost of Capital and the Return on Corporate
Investment. Center for Research in Security Prices, University of Chicago, Working Paper.
Fidelity Bank (2023). Annual Reports retrieved from (www.fidelitybank.ng).
First Bank Nigeria, (2023). Annual Reports retrieved from (www.firstbanknigeria.com).
Friend, I. and Lang, L. (2015): An Empirical Test of the Impact of Managerial self-interest on Corporate
Capital Structure. Journal of Finance, 43(5); 271–281.
Fry, Y.O (2010). Finance Overview. Oxford Review of the Economy. 6(113), 10-23.
Gang, D. (2014). Capital Structure and Corporate Performance: Evidence from Jordan. Australasian
Accounting Business and Finance Journal. 15(3):42-48.
Graham, J.R. (1999). Do Personal Taxes Affect Corporate Financing Decisions? Journal of Public
Economics, 73: 41–73.
Guaranty Trust Bank (2023). Annual Reports retrieved from (www.gtbank.com).
Harris, M. and Raviv, A. (2022): The Perspective of Capital Structure. Journal of Finance, vol. 20(3); 29-
Harward, A. (2014). Introduction to Business Finance. New York, MC Graw Hill.
Huang, O.I. and Song, O.A, (2015). Weak Form Efficiency of the Asia Deposit Money Banks and its Capital
Structures: Further Evidence. Asia Development Review. 21(1): 94-98.
Ibenta, S.N. (2022). Investment Analysis and Financial Management Strategy. Institute for Development
Studies. University of Nigeria. Enugu Campus. Enugu.
Inanga, E. L., and Ajayi, C. A. (2014). Accountancy. Lagos: The CIBN Press Limited.
Itseuwa, J.O and Uwaleke, U (2019). An Insight into the Nigerian Capital
Kester, C. W. (2015): Capital and Ownership Structure: A Comparison of United States and Japanese
Manufacturing Corporations. Financial Management, 15, 5–16.
Khalaf Al-Taani (2013). The Relationship between Capital Structure and Firm Performance: Evidence from
Jordan. Journal of Finance and Accounting. 1(3), 41-45.doi: 10.11648/j.jfa.20130103.11.
Kim, W. S. and Sorensen, E. H. (2013): Evidence on the Impact of the Agency Costs of Debt in
Corporate Debt Policy. Journal of Financial and Quantitative Analysis, 21, 131–144.
Kothari, C.R (2004) Research Methodology Methods and Techniques. New Delhi, New Age
International Publishers Limited.
Lyon, A. (2020). Taxation, Information Asymmetries, and a Firm’s Financing Choices. World Bank Working Paper. 19(35), 50-71.
Mackie-Mason, J. K. (2022): Do Taxes Affect Corporate Financing Decisions? Journal of
Finance, 45(1); 1471–1493.
Martin, and John D. (2021). The Theory of Finance: Evidence and Application. Chicago: The
Dryden Press.
Modigliani, F. and Miller, M. H. (2012). Corporate Income Taxes and Cost of Capital: A
Correction. American Economic Review, 53, 433-443.
Modigliani, F. and Miller, M. H. (2012). The Cost of Capital, Corporate Finance and the theory of
investment. American Economic Review, 48, 261-97.
Myers S.C., (2014). The Capital Structure puzzle. Journal of Finance 34 (3); 575-592.
Myers, S. C. and N. S. Majluf (2011). Corporate Financing and Investment Decisions. When Firms have
Information That Investors Do Not Have. Journal of Financial Economics, 13, 187-222.
Myers, S. C., (2001). Capital Structure. Journal of Economic Perspectives, 15, 81-102.
Nwankwo, O. (2020). Effect of Capital Structure of Nigeria firms on Economic Growth. Mediterranean
Journal of Social Sciences.1 (2): 72-82
Odufu, I.I (2013).Challenges of Banking Sector Reforms as Bank Consolidations in Nigeria. Journal of
Economic Growth, 8(1), 9.
Ogebe, P., Ogbebe J., and Alewi, K. (2014). The Casual Relationship between Capital Structure and Return
on Equity: An Empirical Evidence of Nigeria. Economic Change and Restricting. 3(8): 113-127
Ojemeruaye, E.O. and Oaikhenan, H.E. (2013). A First Course in Econometrics. Henans Universal
Services.Pp36-102, Benin-City, Edo state
Okereke-Onyiuke N. (2015). Stock Market Financing Options for Public Projects in Nigeria. American
Journal of Financial Accounting. 34(6): 424-433.
Oladeji, P. & Olokoye, K. 2019 (2020). Capital Structure and Performance of Selected Industrial Goods
Firms on the Nigerian Stock Market. IOSR Journal of Business and Management (IOSR-JBM),
(7), 42-48.
Olannye A.P (2016). Business research method for business: A skill Building Approach. Asaba;
peejee publications.
Omojefe, G.O. (2014). The Determinants and Impacts of Foreign Direct Investment and the
Nigerian Manufacturing Sector. A PhD Proposal Defence Paper. Pg. 61-62.
Osaze, B.E (2021). The Nigeria Capital Market in the African and Global Financial System. Bofic Consults
Group Limited; Benin City, Edo State.
Osiegbu, P.I, Nwakanma, P.C. and Onuorah, A.C. (2018). Financial management: A managerial approach.
Most Virtue Publishers. Benin City, Edo State.
Owualah, T. S. (2019). Capital Structure and Corporate Performance of Malaysian Construction
Sector. International Journal of Humanities and Social Science, (2); 364-368.
Ozkan, A. (2020). The Determinant of Corporate Debt Maturity. Evidence from United Kingdom
Firms. Applied Financial Accounting, Latin American. 12(3): 19-24.
Pandey, I.M. (2012). Financial Management (8th Ed.). New Delhi: Vikas Publishing House, PVT
Ltd.
Patrick, O., Joseph, O. and Kemi, A. (2018). The impact of capital structure on firms. Journal of
Corporate Financing. 4(1): 370-380.
Pike, E.I and Neale, U.F (2021): The theory of capital structure. Journal of Finance, 46(4); 297–355.
Pinches, G.E. and Mingo, K.A. (1973). A Multivariate Analysis of Industrial Bond Ratings. Journal of
Finance 28, 1-8.
Rajan, R. G. and Zingales, L. (2018). What do we know about Capital Structure? Some Evidence from
International Data. Journal of Finance, 50, 1421–1460.
Remmers, L. Stonehill, A. Wright, R. and Beekhuisen, T. (1974). Industry and Size as Debt Ratio
Determinants in Manufacturing Internationally. Financial Management, Summer: 24-32
Romer, V. (2013). Why Should Governments Issue Bonds? Journal of Money, Credit and Banking.25(2),
Sinha, S. (1992). Inter-Industry Variation in Capital Structure in India. Indian Journal of Finance and
Research, 2, 13-26.
Soludo, C.C. (2011). Consolidating the Nigerian Banking Industry to meet the Development Challenges of
the 21st Century. Address at the Special Meeting of the Bankers’ Committee.
Stanbic IBTC Bank (2015). Annual Report retrieved from (www.stanbicibtc.com).
Stohs, M.H. and Maver, D.C. (2021). The Determinants of Corporate Debt Maturity Structure. Austia.
Journal of Business. 6(9): 279-321.
Titman, S. and Wessels, R. (2012). The Determinants of Capital Structure Choice. Journal of Finance, 43,
–19.
United Bank for Africa (2015). Annual report retrieved from (www.ubagroup.com).
Yazdani, C. (2012). Local Financial Development and Firm performance. New York, Macmilian Publishers.
Zeitun, X.I. and Tian, J.C. (2020). Understanding of Managerial; Ownership and the Link between
Ownership and Performance. Journal of Financial Economies. 6 (2): 559-571
Zenith Bank (2015). Annual Reports retrieved from (www.zenithbanknigeria.com)
