CAPITAL STRUCTURE AND PROFITABILITY OF DEPOSIT MONEY BANKS IN NIGERIA

The study investigated the impact of capital structure (proxy by debt to total asset ratio and debt to equity ratio) on profitability (proxy by return on asset) of listed DMBs in Nigeria for the period 2005-2014. The population of the study comprises seventeen (17) DMBs listed on the Nigerian Stock Exchange (NSE) December, 2014. Out of which ten (10) banks constitute the sample of the study. The study adopted both correlation and ex-post facto research design. The data for the study was purely from secondary source obtained from the annual reports of the sampled banks. Data was analysed using several options of panel regression model estimable by random effect. But the most robust of all is OLS regression as suggested by ‘Breusch and Pagan Lagrangian Multiplier Test for Random Effect’. The results revealed that debt to total asset ratio has a significant positive impact on profitability of listed DMBs in Nigeria; while the impact of Debt-to-Equity ratio on profitability is found to be negative and statistically significant. Based on these findings the study recommends that banks’ finance managers should identify the optimal capital structure that will help to attain the best financial performance in their various business dealings.