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Determinants of capital structure in Nepalese commercial banks / Lalit Prasad Timalsina
Title : Determinants of capital structure in Nepalese commercial banks Material Type: printed text Authors: Lalit Prasad Timalsina, Author Pagination: 122p. Size: GRP/Thesis Accompanying material: 14/B Languages : English Abstract: Capital structure of a firm describes the way in which a firm raises capital needed to establish and expand its business activities. The capital structure decision is one of the most important decisions made by financial managers in this modern era. The capital structure decision is at the center of many other decisions in the area of corporate finance. One of the many objectives of a corporate financial manager is to ensure low cost of capital and thus maximize the wealth of shareholders. Hence, capital structure is one of the effective tools of management to manage the cost of capital. Capital structure choice has inspired and fascinated many researchers. The theoretical determinants of capital structure attributed namely; asset structure, non-debt tax shields, growth, uniqueness, industry classification, firm size, earnings volatility and profitability were tested to see how they affect a firm’s choice of debt-equity mix.
The study attempts to examine the determinants of capital structure in Nepalese commercial banks. Total debt to total assets ratio and total debt to total equity ratio are the dependent variables. The independent variables are return on assets, bank size, asset tangibility, assets growth and liquidity. The study is based on secondary data of 16 commercial banks with 112 observations for the period of 2011/12 to 2017/18. The secondary data and information have been collected from annual reports of selected commercial banks. The regression models are estimated to test the significance and impact of different variables on financial stability of Nepalese commercial banks. The findings of the paper are largely original in the area of capital structure of Nepalese banking.
The result shows that the average total debt to total asset for Nepalese commercial banks is highest for SRBL (12.31%) and lowest for GIBL (3.55%). The results show decreasing trend of average return on asset. The structure and pattern of average total debt to total equity for Nepalese commercial banks is highest for EBL (12.57%) and lowest for GIBL (2.25%). The results also show a decreasing trend of average total debt to total equity. The structure and pattern of return on assets for Nepalese commercial banks is highest for NABIL (2.85%) and lowest for MBL (1.12%). The structure and pattern of bank size for Nepalese commercial banks is highest for NIBL (25.38) and lowest for SRBL (24.31). The structure and pattern of average assets tangibility for Nepalese commercial banks is highest for CIBL (1.88%) and lowest for SCBL (0.21%). The structure and pattern of average assets growth for Nepalese commercial banks is highest for NICA (36.98 %) and lowest for ADBL (14.11 %). The structure and pattern of liquidity ratio for the Nepalese commercial bank is highest for GIBL (31.93%) and lowest for HBL (7.30%).
The descriptive statistics shows total debt to total assets ranges from a minimum of 2.31 percent to the maximum of 16.98 percent to the average of 9.30. However, total debt to total equity ranges from minimum of 0.87 percent to maximum of 16.87 percent leading to an average of 8.94 percent. The average return on assets of selected commercial banks during the study period is noticed to be with a minimum of 0.15 percent and a maximum of 4.01 percent with an average of 1.76 percent. Likewise, bank size a minimum of 23.61 to maximum of 25.87 with an average of 24.84. The average of assets tangibility of selected commercial banks during the study period is noticed to be 1.01 percent with minimum of 0.08 percent and maximum of 2.78 percent. Similarly, the average of assets growth during the study period is noticed to be 22.25 percent with a minimum of -27.13 percent and a maximum of 88.14 percent. And the liquidity ratio ranges from minimum of 4.90 percent to maximum of 36.65 percent, leading to an average of 16.64 percent.
The result shows that there is a negative relationship between return on assets and total debt to total assets ratio. This means that increase in return on assets, leads to decrease in total debt to total assets ratio. Similarly, there is a positive relationship between bank size rate and total debt to total assets ratio. It indicates that higher bank size leads to increase in total debt to total assets ratio. Likewise, there is a positive relationship between tangibility and total debt to total assets ratio. This means that increase in assets tangibility leads to increase in total debt to assets ratio. Further, there is a negative relationship between assets growth and total debt to total assets ratio. This means that higher assets growth leads to decrease in total debt to assets ratio. However, there is a negative relationship between liquidity and total debt to total assets ratio. This means that increase in liquidity ratio leads to decrease in total debt to total assets ratio.
Similarly, the result shows that there is a negative relationship between return on assets and total debt to total equity ratio. This means that increase in return on assets, leads to decrease in total debt to total equity ratio. Similarly, bank size is negatively related to total debt to total equity ratio. It indicates that larger bank size leads to decrease in total debt to total equity ratio. Likewise, tangibility has a negative relation with total debt to total equity ratio. This means that decrease in assets tangibility leads to increase in total debt to total equity ratio. Further, there is a negative relationship between assets growth and total debt to total equity ratio. This means that higher assets growth leads to decrease in total debt to equity ratio. Similarly, there is a negative relationship between liquidity and total debt to total equity ratio. This means that increase in liquidity ratio leads to decrease in total debt to total equity ratio.
The regression shows the return on assets has negative and significant impact on total debt to total assets ratio. The asset growth has negative impact on total debt to total assets ratio. Similarly, liquidity ratio has negative and significant impact on total debt to total assets ratio. Bank size has positive impact on total debt to total assets ratio. Similarly, assets tangibility has positive impact on return on assets.
The regression also shows that return on assets has negative and significant impact on total debt to total equity ratio. Bank size has negative and significant impact on total debt to total assets ratio. Assets tangibility has negative impact on total debt to total equity ratio. Similarly, assets growth rate has negative impact on net interest margin. Likewise, liquidity ratio has negative and significant impact on total debt to total equity ratio.
Determinants of capital structure in Nepalese commercial banks [printed text] / Lalit Prasad Timalsina, Author . - [s.d.] . - 122p. ; GRP/Thesis + 14/B.
Languages : English
Abstract: Capital structure of a firm describes the way in which a firm raises capital needed to establish and expand its business activities. The capital structure decision is one of the most important decisions made by financial managers in this modern era. The capital structure decision is at the center of many other decisions in the area of corporate finance. One of the many objectives of a corporate financial manager is to ensure low cost of capital and thus maximize the wealth of shareholders. Hence, capital structure is one of the effective tools of management to manage the cost of capital. Capital structure choice has inspired and fascinated many researchers. The theoretical determinants of capital structure attributed namely; asset structure, non-debt tax shields, growth, uniqueness, industry classification, firm size, earnings volatility and profitability were tested to see how they affect a firm’s choice of debt-equity mix.
The study attempts to examine the determinants of capital structure in Nepalese commercial banks. Total debt to total assets ratio and total debt to total equity ratio are the dependent variables. The independent variables are return on assets, bank size, asset tangibility, assets growth and liquidity. The study is based on secondary data of 16 commercial banks with 112 observations for the period of 2011/12 to 2017/18. The secondary data and information have been collected from annual reports of selected commercial banks. The regression models are estimated to test the significance and impact of different variables on financial stability of Nepalese commercial banks. The findings of the paper are largely original in the area of capital structure of Nepalese banking.
The result shows that the average total debt to total asset for Nepalese commercial banks is highest for SRBL (12.31%) and lowest for GIBL (3.55%). The results show decreasing trend of average return on asset. The structure and pattern of average total debt to total equity for Nepalese commercial banks is highest for EBL (12.57%) and lowest for GIBL (2.25%). The results also show a decreasing trend of average total debt to total equity. The structure and pattern of return on assets for Nepalese commercial banks is highest for NABIL (2.85%) and lowest for MBL (1.12%). The structure and pattern of bank size for Nepalese commercial banks is highest for NIBL (25.38) and lowest for SRBL (24.31). The structure and pattern of average assets tangibility for Nepalese commercial banks is highest for CIBL (1.88%) and lowest for SCBL (0.21%). The structure and pattern of average assets growth for Nepalese commercial banks is highest for NICA (36.98 %) and lowest for ADBL (14.11 %). The structure and pattern of liquidity ratio for the Nepalese commercial bank is highest for GIBL (31.93%) and lowest for HBL (7.30%).
The descriptive statistics shows total debt to total assets ranges from a minimum of 2.31 percent to the maximum of 16.98 percent to the average of 9.30. However, total debt to total equity ranges from minimum of 0.87 percent to maximum of 16.87 percent leading to an average of 8.94 percent. The average return on assets of selected commercial banks during the study period is noticed to be with a minimum of 0.15 percent and a maximum of 4.01 percent with an average of 1.76 percent. Likewise, bank size a minimum of 23.61 to maximum of 25.87 with an average of 24.84. The average of assets tangibility of selected commercial banks during the study period is noticed to be 1.01 percent with minimum of 0.08 percent and maximum of 2.78 percent. Similarly, the average of assets growth during the study period is noticed to be 22.25 percent with a minimum of -27.13 percent and a maximum of 88.14 percent. And the liquidity ratio ranges from minimum of 4.90 percent to maximum of 36.65 percent, leading to an average of 16.64 percent.
The result shows that there is a negative relationship between return on assets and total debt to total assets ratio. This means that increase in return on assets, leads to decrease in total debt to total assets ratio. Similarly, there is a positive relationship between bank size rate and total debt to total assets ratio. It indicates that higher bank size leads to increase in total debt to total assets ratio. Likewise, there is a positive relationship between tangibility and total debt to total assets ratio. This means that increase in assets tangibility leads to increase in total debt to assets ratio. Further, there is a negative relationship between assets growth and total debt to total assets ratio. This means that higher assets growth leads to decrease in total debt to assets ratio. However, there is a negative relationship between liquidity and total debt to total assets ratio. This means that increase in liquidity ratio leads to decrease in total debt to total assets ratio.
Similarly, the result shows that there is a negative relationship between return on assets and total debt to total equity ratio. This means that increase in return on assets, leads to decrease in total debt to total equity ratio. Similarly, bank size is negatively related to total debt to total equity ratio. It indicates that larger bank size leads to decrease in total debt to total equity ratio. Likewise, tangibility has a negative relation with total debt to total equity ratio. This means that decrease in assets tangibility leads to increase in total debt to total equity ratio. Further, there is a negative relationship between assets growth and total debt to total equity ratio. This means that higher assets growth leads to decrease in total debt to equity ratio. Similarly, there is a negative relationship between liquidity and total debt to total equity ratio. This means that increase in liquidity ratio leads to decrease in total debt to total equity ratio.
The regression shows the return on assets has negative and significant impact on total debt to total assets ratio. The asset growth has negative impact on total debt to total assets ratio. Similarly, liquidity ratio has negative and significant impact on total debt to total assets ratio. Bank size has positive impact on total debt to total assets ratio. Similarly, assets tangibility has positive impact on return on assets.
The regression also shows that return on assets has negative and significant impact on total debt to total equity ratio. Bank size has negative and significant impact on total debt to total assets ratio. Assets tangibility has negative impact on total debt to total equity ratio. Similarly, assets growth rate has negative impact on net interest margin. Likewise, liquidity ratio has negative and significant impact on total debt to total equity ratio.
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Barcode Call number Media type Location Section Status 658/D LAL Thesis/Dissertation Uniglobe Library Philosophy & Psychology Available