The capital structure is made up of debt and equity used to fund the company. Capital structure is one of the key topics in finance among academics. The organization's capacity to carry out the needs of its stakeholders is closely connected to the capital structure. In financial terms, the capital structure means how a company funds its assets through a combination of debt, equity or hybrid securities (Saad, 2010). The organization’s capital structure is very difficult to assess. Financial managers face difficulties in deciding the optimum capital structure precisely. The optimum structure of capital means optimizing the profitability of the enterprise with a minimum weighted average cost of capital and to run a business effectively, a company uses different forms of financing. The Funds System (CS) is actually associated with different forms of funding used by a company to access assets that are necessary for both its processes and growth. The system for funds primarily involves long-term financial debt, preferred shares and real value interest. If you take just how much of any form of financing a company keeps as a portion of its funding, it can be quantified. The system for funds varies from the monetary framework because it encompasses short-term financial debt, payable corporate accounts, and other debts. Most corporations strengthen their accounts by leverage or even financial debt.
Table of Contents
- 1. Introduction
- 2. Literature Review
- 3. Research Methodology
- 3.1 Data and Sample
- 3.2 Variables
- 4. Results and Discussion
- 5. Conclusion
- 6. Recommendations
Objectives and Key Themes
This study aims to empirically investigate the relationship between capital structure and the profitability of Pakistan's banking sector. It seeks to determine the impact of different forms of debt (short-term, long-term, and total debt) on key profitability metrics.
- Impact of capital structure on banking performance in Pakistan
- Relationship between debt (short-term, long-term, total) and profitability metrics (ROA, ROE, EPS)
- Influence of control variables (firm size, asset growth) on profitability
- Analysis of empirical data from Pakistani banks
- Recommendations for future research on capital structure and banking performance
Chapter Summaries
1. Introduction: This introductory chapter establishes the importance of capital structure in finance, defining it as the mix of debt and equity used to fund a company's assets. It highlights the challenges financial managers face in determining the optimal capital structure that balances profitability with minimizing the weighted average cost of capital. The chapter sets the stage for the study by emphasizing the complexity of assessing capital structure and its close connection to an organization's ability to meet stakeholder needs.
2. Literature Review: This chapter reviews existing literature on the relationship between capital structure and firm performance. It examines studies such as Ebaid (2009), which analyzed the impact of debt levels on the financial performance of Egyptian firms, and Pratheepkanth (2011), which explored the same relationship for Sri Lankan companies. The review highlights contrasting viewpoints on the determination of optimal capital structure and firm efficiency, ultimately motivating the current study's focus on the Pakistani banking sector.
3. Research Methodology: This chapter details the research methodology employed in the study. It explains the use of deductive reasoning and quantitative methods to analyze data collected from secondary sources, primarily financial statements of Pakistani banks obtained from the Karachi Stock Exchange (KSE) and the State Bank of Pakistan (SBP). The chapter outlines the data collection process, specifying the sample of 25 banks over the period of 2007-2011. It also defines the key variables used in the analysis: independent variables (long-term debt, short-term debt, total debt, firm size, asset growth), and dependent variables (Return on Equity (ROE), Return on Assets (ROA), and Earnings Per Share (EPS)).
4. Results and Discussion: This chapter presents the findings of the study, analyzed using descriptive statistics, correlation, and regression techniques. The results, presented in Tables 1, 2, and 3 (not included in this preview), illustrate the relationships between the independent and dependent variables, revealing the impact of different capital structure components on profitability metrics. This section likely contains detailed statistical analysis and interpretation of the findings.
Keywords
Capital structure, banking performance, profitability, debt (short-term, long-term, total), Return on Assets (ROA), Return on Equity (ROE), Earnings Per Share (EPS), Pakistan, financial leverage, firm size, asset growth, empirical analysis, regression analysis.
Frequently asked questions
What is the purpose of this document?
This document is a language preview containing the title, table of contents, objectives and key themes, chapter summaries, and keywords related to an academic study.
What is the topic of the academic study?
The study empirically investigates the relationship between capital structure and the profitability of Pakistan's banking sector. It specifically examines the impact of different forms of debt (short-term, long-term, and total debt) on key profitability metrics.
What are the key objectives of the study?
The study aims to: determine the impact of capital structure on banking performance in Pakistan; analyze the relationship between debt and profitability metrics (ROA, ROE, EPS); assess the influence of control variables (firm size, asset growth) on profitability; analyze empirical data from Pakistani banks; and provide recommendations for future research on capital structure and banking performance.
What are the key themes explored in the study?
The key themes include the impact of capital structure on banking performance in Pakistan, the relationship between debt and profitability, the influence of control variables on profitability, analysis of empirical data from Pakistani banks, and recommendations for future research.
What is the focus of Chapter 1 (Introduction)?
Chapter 1 establishes the importance of capital structure in finance, defining it as the mix of debt and equity used to fund a company's assets. It highlights the challenges in determining the optimal capital structure that balances profitability with minimizing the weighted average cost of capital.
What is the focus of Chapter 2 (Literature Review)?
Chapter 2 reviews existing literature on the relationship between capital structure and firm performance, referencing studies such as Ebaid (2009) and Pratheepkanth (2011). It highlights contrasting viewpoints on the determination of optimal capital structure and firm efficiency.
What is the focus of Chapter 3 (Research Methodology)?
Chapter 3 details the research methodology employed in the study, including the use of deductive reasoning and quantitative methods to analyze data collected from secondary sources (financial statements of Pakistani banks). It outlines the data collection process, specifying the sample of 25 banks over the period of 2007-2011, and defines the key variables used in the analysis.
What variables are used in the research methodology?
The study utilizes the following variables: independent variables (long-term debt, short-term debt, total debt, firm size, asset growth) and dependent variables (Return on Equity (ROE), Return on Assets (ROA), and Earnings Per Share (EPS)).
What is the focus of Chapter 4 (Results and Discussion)?
Chapter 4 presents the findings of the study, analyzed using descriptive statistics, correlation, and regression techniques, revealing the impact of different capital structure components on profitability metrics.
What keywords are associated with this study?
Keywords include: Capital structure, banking performance, profitability, debt (short-term, long-term, total), Return on Assets (ROA), Return on Equity (ROE), Earnings Per Share (EPS), Pakistan, financial leverage, firm size, asset growth, empirical analysis, regression analysis.
- Arbeit zitieren
- Aaima Khalid (Autor:in), 2021, Impact of Capital Structure on Banking Performance. Case Study of Pakistan, München, GRIN Verlag, https://www.hausarbeiten.de/document/1589648
