Capital Structure and Financial Performance of Banks

The paper analyses the influence of capital structure on the financial performance of banks in India. The study covers a period of five years from 2011 to 2015 and 21 banks are selected for the study. The objectives of the study are to examine the impact of capital structure on the financial performance of banks and to analyse the interrelation between financial leverage on the financial performance of banks. To measure the capital structure, debt to total assets ratio and debt to equity ratios are used and to measure the financial performance, return on capital employed (ROCE), net profit ratio (NP) and net interest margin (NIM) are used. Regression analysis has been carried out to test the impact of capital structure on profitability considering capital structure as an independent variable and profitability as the dependent variable. The results of the study indicate that the capital structure has a significant impact on the financial performance of the banks in India.