The Relationship between Capital Structure and Profitability in Commercial Banks: Evidence from Iran

This study aims to investigate the relationship between the profitability and the capital structure of banks. The statistical population of this research consists of all public and private banks for a decade from 2003 to 2012. Using the screening method, the sample is comprised of 18 public and private banks. In this study, return on assets, return on equity, and committed net interest margin are selected as dependent variables and debt-to-equity ratio and debt-to-assets ratio are considered as independent variables. This research exploits compilation and panel (board) data with random and fixed effects and data analysis results at the 95% confidence level shows that Debt-to-equity and debt-to-assets have a direct and significant relationship (p<0.05) with return on equity and return on assets. Moreover, results indicate that there is no significant relationship between debt-to-equity and debt-to-assets ratios and the committed net interest margin of the banks.