# Impacts of Capital Structure on Performance of Banks in a Developing Economy: Evidence from Bangladesh

^{1}

^{2}

^{3}

^{*}

## Abstract

**:**

## 1. Introduction

## 2. Literature Review

#### 2.1. Previous Empirical Studies

#### 2.1.1. Positive Conclusions

#### 2.1.2. Negative Conclusions

#### 2.1.3. No Relationship

#### 2.1.4. Findings in the Context of Bangladesh

## 3. Methodology

#### 3.1. Data Sources and Description

#### 3.2. Variables Selection

#### 3.2.1. Independent Variables

#### 3.2.2. Control Variables

#### 3.3. Empirical Model

_{it}, measured by ROA, ROE and EPS for bank i in year t, as follows:

_{it}reflects the bank i’s performance in year t (dependent variables). CS

_{it}corresponds to the matrix of capital structure variables (independent variables). X

_{it}represents the matrix of bank-specific variables for the bank i in period t. MACRO

_{t}is a matrix of the macroeconomic state of affairs’ variables, which is measured by GDP growth rate and an inflation rate of the country in year t. Ɛ

_{it}is a disturbance error term, autonomously and equally distributed as N (0, σ2) and α

_{0}corresponds to a bank permanent consequence term, which measures the time-invariant effect exactly for bank i.

_{1}, β

_{2}and β

_{3}represent the regression coefficient for the variables STDTA, LTDTA and TDTA, respectively; λ

_{1}, λ

_{2}and λ

_{3}represent the regression coefficient for the bank-specific variables, namely, LQDTY, SZ and GOP, respectively, and θ

_{1}and θ

_{2}represent the regression coefficient for the macro-variables, namely, RGDP and INF, respectively.

## 4. Empirical Findings and Their Discussion

#### 4.1. Descriptive Statistics

#### 4.2. Multicollinearity Test

#### 4.3. Cross-Sectional Dependence Test

#### 4.4. Panel Unit Root Tests

_{1}and K

_{2}depend upon the deterministic element of the models. Pesaran (2007) presents values for K

_{1}and K

_{2}obtained by simulations for models with intercept and no trend (K

_{1}= 6.19 and K

_{2}= 2.61) and models with intercept and trend (K

_{1}= 6.42 and K

_{2}= 1.70) for various combinations of N and T. Applying the truncated version, the test was calculated for both “intercept” and “intercept and trend” specifications. Table 6 presents Pesaran’s panel unit root test allowing for CD.

#### 4.5. Dealing with the Possible Heteroskedasticity

#### 4.6. Test of Endogeneity

_{i}in Equation (5), must be statistically different from zero. Once we estimate the reduced equation, in the next step, we estimate the residual of this reduced equation and then incorporate it as a regressor in our specified structural equation. In this way, the structural equation’s residual becomes a function of the reduced equation’s residual (V

_{it}) plus an error term ${\eta}_{it}$. Thus,

_{it}is not significantly different from zero. Thus, we reject the null hypothesis that BP and TDTA are endogenous.

#### 4.7. The Results and Discussion of Regression

#### 4.8. Robustness Check

## 5. Conclusions

## Author Contributions

## Conflicts of Interest

## References

- Abbas, Ali, Zahid Bashir, Shahid Manzoor, and Muhammad Nadeem Akram. 2013. Determinants of firm’s financial performance: an empirical study on textile sector of Pakistan. Business and Economic Research 3: 76–86. [Google Scholar] [CrossRef]
- Abdel-Jalil, Towfiq. 2014. The impact of capital structure on the performance of the Jordanian publicly-held industrial companies. Jordan Journal of Business Administration 10: 390–403. [Google Scholar]
- Abor, Joshua. 2005. The effect of capital structure on profitability: an empirical analysis of listed firms in Ghana. The Journal of Risk Finance 6: 438–45. [Google Scholar] [CrossRef]
- Abu-Rub, Nour. 2012. Capital structure and firm performance: evidence from Palestine stock exchange. Journal of Money, Investment and Banking 23: 109–17. [Google Scholar]
- Adrian, Tobias, and Hyun Song Shin. 2010. Liquidity and leverage. Journal of Financial Intermediation 19: 418–37. [Google Scholar] [CrossRef]
- Akeem, Lawal Babatunde, Edwin Terer K., Monica Wanjiru Kiyanjui, and Adisa Matthew Kayode. 2014. Effects of capital structure on firm’s performance: empirical study of manufacturing companies in Nigeria. Journal of Finance and Investment Analysis 3: 39–57. [Google Scholar]
- AL-Taani, Khalaf. 2013. The relationship between capital Structure and firm’s performance: evidence from Jordan. Journal of Finance and Accounting 1: 41–5. [Google Scholar] [CrossRef]
- Arbabiyan, Ali-Akbar, and Mehdi Safari. 2009. The effects of capital structure and profitability in the listed firms in Tehran Stock Exchange. Journal of Management Perspective 33: 159–75. [Google Scholar]
- Athanasoglou, P. Athanasoglou, Sophocles N. Brissimis, and Matthaios D. Delis. 2008. Bank-specific, industry-specific and macroeconomic determinants of bank profitability. Journal of International Financial Markets, Institutions and Money 18: 121–36. [Google Scholar] [CrossRef]
- Berger, Allen N., and Emilia Bonaccorsi di Patti. 2006. Capital structure and firm performance: A new approach to testing agency theory and an application to the banking industry. Journal of Banking & Finance 30: 1065–102. [Google Scholar]
- Besley, Scott, and Eugene F. Brigham. 2008. Essentials of Managerial Finance. Mason: Thomson South-Western. [Google Scholar]
- Brigham, Eugene F., and Joel F. Houston. 2004. Fundamental of Financial Management. Mason: Thomson South-Western. [Google Scholar]
- Chakraborty, Indrani. 2010. Capital structure in an emerging stock market: the case of India. Research in International Business and Finance 24: 295–314. [Google Scholar] [CrossRef]
- Chowdhury, Anup, and Suman Paul Chowdhury. 2010. Impact of capital structure on firm’s value: evidence from Bangladesh. Business and Economic Horizons 3: 111–22. [Google Scholar] [CrossRef]
- Ebaid, Ibrahim El-Say. 2009. The impact of capital-structure choice on firm performance: empirical evidence from Egypt. The Journal of Risk Finance 10: 477–87. [Google Scholar] [CrossRef]
- Flamini, Valentina, Calvin McDonald, and Liliana Schumacher. 2009. The determinants of commercial bank profitability in Sub-Saharan Africa. IMF Working Paper No. 09/15. Washington, DC, USA: International Monetary Fund. [Google Scholar]
- Gujarati, Damodar, and Dawn Porter. 2009. Basic Econometrics. New York: Tata McGraw-Hill Education. [Google Scholar]
- Hall, Marshall, and Leonard Weiss. 1967. Firm size and profitability. The Review of Economics and Statistics 49: 319–31. [Google Scholar] [CrossRef]
- Haque, Faizul, Thankom Gopinath Arun, and Colin Kirkpatrick. 2011. Corporate governance and capital structure in developing countries: A case study of Bangladesh. Applied Economics 43: 673–81. [Google Scholar] [CrossRef]
- Hasan, Md. Bokhtiar, A. F. M. Mainul Ahsan, Md. Afzalur Rahaman, and Md. Nurul Alam. 2014. Influence of capital structure on firm performance: evidence from Bangladesh. International Journal of Business and Management 9: 184–94. [Google Scholar] [CrossRef]
- Hossain, Md. Imran, and Md. Akram Hossain. 2015. Determinants of capital structure and testing of theories: a study on the listed manufacturing companies in Bangladesh. International Journal of Economics and Finance 7: 176–90. [Google Scholar] [CrossRef]
- Im, Kyung So, M. Hashem Pesaran, and Yongcheol Shin. 2003. Testing for unit roots in heterogeneous panels. Journal of Econometrics 115: 53–74. [Google Scholar] [CrossRef]
- Jahan, Nusrat. 2012. Determinants of bank’s profitability: Evidence from Bangladesh. Indian Journal of Finance 6: 32–38. [Google Scholar]
- Jensen, Michael C., and William H. Meckling. 1976. Theory of the firm: managerial behavior, agency costs and ownership structure. Journal of Financial Economics 3: 305–60. [Google Scholar] [CrossRef]
- Manawaduge, Athula, Anura De Zoysa, Khorshed Chowdhury, and Anil Chandarakumara. 2011. Capital structure and firm performance in emerging economies: An empirical analysis of Sri Lankan firms. Corporate Ownership & Control 8: 253–63. [Google Scholar]
- Memon, Fozia, Niaz Ahmed Bhutto, and Ghulam Abbas. 2012. Capital structure and firm performance: A case of textile sector of Pakistan. Asian Journal of Business and Management Sciences 1: 9–15. [Google Scholar]
- Modigliani, Franco, and Merton H. Miller. 1958. The cost of capital, corporate finance and the theory of investment. The American Economic Review 48: 261–97. [Google Scholar]
- Modigliani, Franco, and Merton H. Miller. 1963. Corporation income taxes and the cost of capital: A correction. The American Economic Review 53: 433–43. [Google Scholar]
- Muritala, Taiwo Adewale. 2012. An empirical analysis of capital structure on firms’ performance in Nigeria. International Journal of Advances in Management and Economics 1: 116–24. [Google Scholar]
- Myers, Stewart C. 1977. Determinants of corporate borrowing. Journal of Financial Economics 5: 147–75. [Google Scholar] [CrossRef]
- Nachane, Dilip M. 2006. Econometrics: Theoretical foundations and empirical perspectives. New Delhi: Oxford University Press. [Google Scholar]
- Nguyen, Chu V., Anisul M. Islam, and Muhammad Mahboob Ali. 2011. The current state of the financial sector of Bangladesh: An analysis. AIUB Business and Economics Working Paper Series, No. 2011-03; Dhaka, Bangladesh: American International University-Bangladesh (AIUB). [Google Scholar]
- Nikoo, Seyedeh Farokh. 2015. Impact of Capital Structure on Banking Performance: Evidence from Tehran Stock Exchange. International Research Journal of Applied and Basic Sciences 9: 923–27. [Google Scholar]
- Obamuyi, Tomola Marshal. 2013. Determinants of banks’ profitability in a developing economy: Evidence from Nigeria. Organizations and Markets in Emerging Economies 4: 97–111. [Google Scholar]
- Onay, Ceylan, and Emre Ozsoz. 2013. The impact of internet-banking on brick and mortar branches: The case of Turkey. Journal of Financial Services Research 44: 187–204. [Google Scholar] [CrossRef]
- Pesaran, M. Hashem. 2004. General diagnostic tests for cross section dependence in panels. Cambridge Working Papers in Economics. Available online: https://doi.org/10.17863/CAM.5113 (accessed on 22 February 2017).
- Pesaran, M. Hashem. 2007. A simple panel unit root test in the presence of cross section dependence. Journal of Applied Econometrics 22: 265–312. [Google Scholar] [CrossRef]
- Pouraghajan, Abbasali, Esfandiar Malekian, Milad Emamgholipour, Vida Lotfollahpour, and Mohammad Mohammadpour Bagheri. 2012. The relationship between capital structure and firm performance evaluation measures: Evidence from the Tehran stock exchange. International Journal of Business and Commerce 1: 166–81. [Google Scholar]
- Ramadan, Zeyad Saleem, and Imad Zeyad Ramadan. 2015. Capital structure and firm’s performance of Jordanian manufacturing sector. International Journal of Economics and Finance 7: 279–84. [Google Scholar] [CrossRef]
- Rao, K. Rama, and Tekeste Berhanu Lakew. 2012. Determinants of profitability of commercial banks in a developing country: Evidence from Ethiopia. International Journal of Accounting and Financial Management Research 2: 1–20. [Google Scholar]
- Rouf, Md. Abdur. 2015. Capital structure and firm performance of listed non-financial companies in Bangladesh. The International Journal of Applied Economics and Finance 9: 25–32. [Google Scholar]
- Safiuddin, Md., Md. Mohedul Islam, and Md. Anisuzzaman. 2015. Impact of financial structure on firm’s performance: A study on financial and nonfinancial sector in Bangladesh. European Journal of Business and Management 7: 30–38. [Google Scholar]
- Salim, Mahfuzah, and Raj Yadav. 2012. Capital structure and firm performance: Evidence from Malaysian listed companies. Procedia - Social and Behavioral Sciences 65: 156–66. [Google Scholar] [CrossRef]
- Salteh, Heydar Mohammadzadeh, Elham Ghanavati, Vahid Taghizadeh Khanqah, and Mohsen Akbari Khosroshahi. 2012. Capital structure and firm performance: Evidence from Tehran stock exchange. International Proceedings of Economics Development & Research 43: 225–30. [Google Scholar]
- Schepens, Glenn. 2016. Taxes and bank capital structure. Journal of Financial Economics 120: 585–600. [Google Scholar] [CrossRef]
- Soumadi, Mustafa M., and Osama Suhail Hayajneh. 2012. Capital structure and corporate performance empirical study on the public Jordanian shareholdings firms listed in the Amman stock market. European Scientific Journal 8: 173–89. [Google Scholar]
- Sufian, Fadzlan, and Muzafar Shah Habibullah. 2009. Determinants of bank profitability in a developing economy: Empirical evidence from Bangladesh. Journal of Business Economics and Management 10: 207–17. [Google Scholar] [CrossRef]
- Trujillo-Ponce, Antonio. 2013. What determines the profitability of banks? Evidence from Spain. Accounting and Finance 53: 561–86. [Google Scholar] [CrossRef]
- Umar, Muhammad, Zaighum Tanveer, Saeed Aslam, and Muhammad Sajid. 2012. Impact of capital structure on firm’s financial Performance: Evidence from Pakistan. Research Journal of Finance and Accounting 3. No. 9. [Google Scholar]
- Van Horne, James C., and John M. Wachowicz. 2008. Fundamentals of Financial Management. Harlow: Pearson Education. [Google Scholar]
- Wooldridge, Jeffrey M. 2015. Introductory Econometrics: A Modern Approach. Ontario: Nelson Education. [Google Scholar]

Variable | Legend | Measurement | Sign |
---|---|---|---|

Dependent variables: | |||

Return on asset | ROA | Net profit (before taxes)/Total assets | + |

Return on equity | ROE | Net profit (before taxes)/Equity | + |

Earnings per share | EPS | Net income/number of shares outstanding | + |

Independent variables: | |||

Short-term debt obligations to total asset | STDTA | Short-term debt/Total asset | − |

Long-term debt obligations to total asset | LTDTA | Long-term debt/Total asset | − |

Total debt obligations to total asset | TDTA | Total debt/Total asset | − |

Liquidity | LQDTY | Current asset/Current liabilities | − |

Size | SZ | Natural logarithm of total assets | + |

Growth opportunities | GOP | (Assets of current year-Assets of previous year)/Assets of previous year | + |

Economic growth | RGDP | Natural logarithm of GDP | + |

Inflation | INF | The annual inflation rate | + |

Variable | Obs | Mean | Standard Deviation | Min | Max |
---|---|---|---|---|---|

ROA | 220 | 1.476628 | 0.6374654 | 0.21 | 3.8 |

ROE | 220 | 19.04206 | 7.292161 | 6.11 | 46.22 |

EPS | 220 | 3.727909 | 1.762933 | 0.3264574 | 9.74 |

TDTA | 220 | 0.8704154 | 0.0843272 | 0.6680902 | 0.9801438 |

LTDTA | 220 | 0.7847493 | 0.0928381 | 0.5305739 | 0.9001438 |

STDTA | 220 | 0.1397861 | 0.088877 | 0.0114734 | 0.3831729 |

SIZE | 220 | 4.543462 | 0.6903714 | 2.038187 | 6.425046 |

LQDTY | 220 | 11.1721 | 4.420662 | 3.094959 | 31.12727 |

GOP | 198 | 0.2782329 | 0.1292053 | 0.032776 | 0.8618333 |

RGDP | 220 | 6.195767 | 0.5546968 | 5.045125 | 7.058636 |

INF | 220 | 6.757129 | 1.07456 | 4.586361 | 8.164598 |

ROA | ROE | EPS | TDTA | LTDTA | STDTA | SIZE | LQDTY | GOP | RGDP | INF | |
---|---|---|---|---|---|---|---|---|---|---|---|

ROA | 1.00 | ||||||||||

ROE | 0.56 | 1.00 | |||||||||

EPS | 0.41 | 0.48 | 1.00 | ||||||||

TDTA | −0.23 | −0.18 | 0.02 | 1.00 | |||||||

LTDTA | −0.08 | −0.08 | −0.18 | −0.11 | 1.00 | ||||||

STDTA | −0.21 | −0.13 | −0.01 | 0.23 | −0.41 | 1.00 | |||||

SIZE | 0.28 | 0.28 | 0.31 | −0.16 | −0.13 | −0.12 | 1.00 | ||||

LQDTY | 0.11 | 0.11 | −0.18 | 0.03 | 0.22 | −0.32 | 0.10 | 1.00 | |||

GOP | 0.32 | 0.31 | 0.21 | 0.05 | −0.16 | −0.01 | 0.21 | 0.37 | 1.00 | ||

RGDP | −0.29 | −0.17 | −0.17 | 0.03 | 0.01 | 0.04 | −0.26 | −0.07 | −0.14 | 1.00 | |

INF | 0.13 | −0.02 | −0.04 | −0.01 | 0.03 | 0.01 | −0.16 | 0.02 | −0.05 | −0.17 | 1.00 |

Variable | VIF | 1/VIF |
---|---|---|

LTDTA | 2.48 | 0.403233 |

STDTA | 2.47 | 0.404269 |

GOP | 1.44 | 0.694859 |

LQDTY | 1.40 | 0.713799 |

SIZE | 1.35 | 0.739888 |

RGDP | 1.11 | 0.902967 |

TDTA | 1.11 | 0.903474 |

INF | 1.09 | 0.916670 |

Mean VIF | 1.56 |

Model 1 | Model 2 | Model 3 | |||
---|---|---|---|---|---|

CD Statistic | Probability | CD Statistic | Probability | CD Statistic | Probability |

8.761 | 0.000 *** | 5.349 | 0.000 *** | 8.003 | 0.000 *** |

Variables | Intercept | Intercept and Trend | ||
---|---|---|---|---|

p = 0 | p = 1 | p = 0 | p = 1 | |

ROA | −1.367 | −1.301 | −2.345 | −2.451 |

ROE | −1.512 | −1.411 | −1.642 | −1.697 |

EPS | −1.268 | −1.371 | −1.489 | −1.532 |

STDTA | −1.817 | −1.894 | −2.712 ** | −2.915 ** |

LTDTA | −1.355 | −1.390 | −1.677 | −1.714 |

TDTA | −1.473 | −1.491 | −1.618 | −1.708 |

LIQDTY | −1.543 | −1.579 | −1.671 | −1.719 |

SZ | −1.442 | −1.474 | −1.616 | −1.678 |

GOP | −1.389 | −1.464 | −1.654 | −1.672 |

RGDP | −1.456 | −1.519 | −2.717 ** | −2.899 ** |

INF | −1.475 | −1.492 | −1.687 | −1.723 |

Dependent Var: TDTA | Coef. | Robust SE. | t | P > |t| |
---|---|---|---|---|

IA | 0.4182352 | 0.1001509 | 4.18 | 0.000 *** |

LTDTA | 0.036497 | 0.106435 | 1.34 | 0.032 ** |

STDTA | 0.1680941 | 0.1091572 | 1.54 | 0.025 ** |

SIZE | −0.0244025 | 0.0092514 | −2.64 | 0.009 *** |

LQDTY | 0.0021219 | 0.001551 | 1.37 | 0.173 |

GOP | 0.0553865 | 0.0515511 | 1.07 | 0.084 ** |

RGDP | −0.002645 | 0.0104215 | −0.25 | 0.800 |

INF | −0.0024468 | 0.0072802 | −0.34 | 0.737 |

_cons | 0.7847624 | 0.1635777 | 4.80 | 0.000 *** |

R-squared | 0.1267 | |||

Adj R^{2} | 0.0897 | |||

F-Statistic | 10.05 (p-value = 0.0000) |

Explanatory Variables | Dependent Variables | ||||||||
---|---|---|---|---|---|---|---|---|---|

ROA | ROE | EPS | |||||||

Coef. | Robust SE. | P > |t| | Coef. | Robust SE. | P > |t| | Coef. | Robust SE. | P > |t| | |

TDTA | −1.135 | 1.937 | 0.063 * | −16.845 | 22.308 | 0.051 ** | 3.861 | 7.734 | 0.618 |

LTDTA | −2.046 | 0.697 | 0.004 *** | −13.222 | 7.593 | 0.083 * | −3.545 | 1.926 | 0.067 * |

STDTA | −2.850 | 0.975 | 0.004 *** | −13.638 | 10.443 | 0.093 * | −4.915 | 2.748 | 0.075 * |

SIZE | 0.1086 | 0.062 | 0.082 * | 1.423 | 0.669 | 0.035 ** | 0.583 | 0.227 | 0.011 ** |

LQDTY | −0.0086 | 0.010 | 0.397 | −0.0198 | 0.114 | 0.862 | −0.137 | 0.032 | 0.000 ** |

GOP | 1.052 | 0.362 | 0.004 *** | 13.947 | 3.974 | 0.001 *** | 3.159 | 1.169 | 0.008 *** |

RGDP | −0.227 | 0.071 | 0.002 *** | −1.177 | 0.893 | 0.189 | −0.282 | 0.218 | 0.197 |

INF | 0.090 | 0.047 | 0.061 * | −0.008 | 0.567 | 0.989 | −0.098 | 0.140 | 0.484 |

Vit | −1.033 | 2.098 | 0.623 | 2.823 | 24.721 | 0.909 | −1.749 | 8.009 | 0.827 |

_cons | 3.878 | 1.846 | 0.037 ** | 43.190 | 21.721 | 0.048 ** | 4.303 | 7.498 | 0.067 * |

R-squared | 0.2982 | 0.2000 | 0.2465 | ||||||

Adj R^{2} | 0.2646 | 0.1617 | 0.2104 | ||||||

F-Statistic | 9.34 (p-value = 0.0000) | 8.09 (p-value = 0.0000) | 9.19 (p-value = 0.0000) |

Explanatory Variables | Dependent Variables | ||||||||
---|---|---|---|---|---|---|---|---|---|

ROA | ROE | EPS | |||||||

Coef. | Robust SE. | P > |t| | Coef. | Robust SE. | P > |t| | Coef. | Robust SE. | P > |t| | |

TDTA | −1.334 | 0.507 | 0.009 *** | −14.117 | 6.426 | 0.029 ** | 2.170 | 1.311 | 0.097 * |

LTDTA | −1.989 | 0.683 | 0.004 *** | −13.378 | 7.402 | 0.072 * | −3.448 | 1.857 | 0.065 * |

STDTA | −2.570 | 0.698 | 0.000 *** | −14.403 | 7.212 | 0.047 ** | −4.441 | 1.750 | 0.012 ** |

SIZE | 0.0896 | 0.054 | 0.100 * | 1.475 | 0.542 | 0.007 *** | 0.551 | 0.156 | 0.001 *** |

LQDTY | −0.007 | 0.009 | 0.477 | −0.024 | 0.119 | 0.840 | −0.134 | 0.029 | 0.000 ** |

GOP | 1.109 | 0.345 | 0.002 *** | 13.792 | 3.565 | 0.000 *** | 3.255 | 1.053 | 0.002 *** |

RGDP | −0.229 | 0.070 | 0.001 *** | −1.172 | 0.896 | 0.193 | −0.284 | 0.216 | 0.190 |

INF | 0.087 | 0.048 | 0.069 * | −0.009 | 0.554 | 0.999 | −0.103 | 0.136 | 0.451 |

_cons | 4.743 | 1.070 | 0.000 *** | 40.827 | 12.447 | 0.001 *** | 5.767 | 3.196 | 0.073 * |

R-squared | 0.2977 | 0.2000 | 0.2463 | ||||||

Adj R^{2} | 0.2679 | 0.1661 | 0.2144 | ||||||

F-Statistic | 10.22 (p-value = 0.0000) | 8.85 (p-value = 0.0000) | 10.30 (p-value = 0.0000) |

**Table 10.**Results of regressions (based on sample periods of 2005–2009 and 2010–2014) and quantile regressions (Model 1: dependent variable ROA).

Variables | OLS (2005–2014) | OLS (2005–2009) | OLS (2010–2014) | Quantile Regressions | ||||
---|---|---|---|---|---|---|---|---|

1st Quant. | 2nd Quant. | 3rd Quant. | 4th Quant. | 5th Quant. | ||||

(1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9) |

TDTA | −1.334 | −1.790 | −1.176 | −0.505 | −1.425 | −1.442 | −0.876 | −3.276 |

(0.009) *** | (0.014) ** | (0.080) * | (0.528) | (0.092) * | (0.007) *** | (0.323) | (0.022) ** | |

LTDTA | −1.989 | −2.340 | −1.586 | −1.146 | −0.662 | −2.217 | −3.038 | −2.772 |

(0.004) *** | (0.075) ** | (0.054) * | (0.143) | (0.427) | (0.020) ** | (0.008) *** | (0.054) * | |

STDTA | −2.570 | −3.150 | −1.800 | −2.99 | −0.796 | −2.039 | −3.599 | −4.702 |

(0.000) *** | (0.024) ** | (0.035) ** | (0.007) *** | (0.385) | (0.012) ** | (0.001) *** | (0.027) ** | |

SIZE | 0.0896 | 0.250 | 0.038 | −0.012 | 0.066 | −0.0047 | 0.049 | 0.233 |

(0.100) * | (0.016) ** | (0.654) | (0.856) | (0.050) ** | (0.291) | (0.083) * | (0.147) | |

LQDTY | −0.007 | 0.004 | −0.020 | −0.045 | −0.020 | 0.744 | 0.006 | −0.020 |

(0.477) | (0.733) | (0.208) | (0.002) *** | (0.204) | (0.656) | (0.683) | (0.353) | |

GOP | 1.109 | 0.153 | 1.748 | 2.24 | 1.509 | −0.325 | 1.229 | 0.337 |

(0.002) *** | (0.728) | (0.006) *** | (0.000) *** | (0.022) ** | (0.160) | (0.009) *** | (0.677) | |

RGDP | −0.229 | −0.1627 | −0.737 | −0.274 | −0.319 | 0.076 | −0.121 | −0.010 |

(0.001) *** | (0.039) ** | (0.001) *** | (0.001) *** | (0.004) *** | (0.000) *** | 0.105 | (0.962) | |

INF | 0.087 | 0.0299 | 0.239 | 0.118 | 0.039 | 0.097 | 0.097 | 0.256 |

(0.069) * | (0.707) | (0.003) *** | (0.100) * | (0.543) | (0.093) * | (0.189) | (0.187) | |

_Cons | 4.743 | 4.923 | 6.378 | 3.28 | 4.19 | 5.585 | 4.910 | 5.558 |

(0.000) *** | (0.005) *** | (0.000) *** | (0.000) *** | (0.026) ** | (0.000) *** | (0.003) *** | (0.019) ** |

**Table 11.**Results of regressions (based on sample periods of 2005–2009 and 2010–2014) and quantile regressions (Model 2: Dependent variable ROE).

Variables | OLS (2005–2014) | OLS (2005–2009) | OLS (2010–2014) | Quantile Regression | ||||
---|---|---|---|---|---|---|---|---|

0.05 | 0.25 | 0.50 | 0.75 | 0.95 | ||||

(1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9) |

TDTA | −14.117 | −5.236 | −16.445 | 0.348 | −13.731 | −15.831 | −17.205 | −17.038 |

(0.029) ** | (0.608) | (0.013) ** | (0.969) | (0.004) *** | (0.076) * | (0.197) | (0.072) * | |

LTDTA | −13.378 | −46.872 | 0.459 | −2.860 | −0.512 | −11.223 | −8.540 | −38.211 |

(0.072) * | (0.013) ** | (0.954) | (0.082) * | (0.966) | (0.373) | (0.213) | (0.091) * | |

STDTA | −14.403 | −46.509 | −1.175 | 7.662 | 3.274 | −13.443 | −14.089 | −55.163 |

(0.047) ** | (0.019) ** | (0.887) | (0.406) | (0.768) | (0.283) | (0.072) * | (0.021) * | |

SIZE | 1.475 | 2.966 | 0.952 | 1.309 | 1.404 | 0.989 | 1.334 | 2.275 |

(0.007) *** | (0.044) ** | (0.254) | (0.257) | (0.010) * | (0.189) | (0.227) | (0.052) * | |

LQDTY | −0.024 | −0.220 | 0.1184 | −0.378 | 0.046 | 0.157 | 0.040 | −0.009 |

(0.840) | (0.225) | (0.461) | (0.177) | (0.628) | (0.207) | (0.843) | (0.998) | |

GOP | 13.792 | 3.678 | 10.732 | 15.791 | 18.735 | 8.330 | 20.858 | 8.913 |

(0.000) *** | (0.560) | (0.079) * | (0.042) ** | (0.000) *** | (0.075) * | (0.024) ** | (0.693) | |

RGDP | −1.172 | −0.211 | −1.560 | −1.022 | −0.966 | −0.241 | 1.454 | 0.579 |

(0.193) | (0.848) | (0.218) | (0.478) | (0.209) | (0.793) | (0.341) | (0.754) | |

INF | −0.009 | 0.296 | 0.485 | 0.829 | 0.131 | 0.234 | −0.291 | 0.859 |

(0.999) | (0.794) | (0.437) | (0.340) | (0.797) | (0.690) | (0.740) | (0.563) | |

_Cons | 40.827 | 55.861 | 63.627 | 4.686 | 19.392 | 33.767 | 45.217 | 60.898 |

(0.001) *** | (0.023) ** | (0.000) *** | (0.801) | (0.100) * | (0.009) *** | (0.024) ** | (0.031) ** |

**Table 12.**Results of regressions (based on sample periods of 2005–2009 and 2010–2014) and quantile regressions (Model 3: Dependent variable EPS).

Variables | OLS (2005–2014) | OLS (2005–2009) | OLS (2010–2014) | Quantile Regression | ||||
---|---|---|---|---|---|---|---|---|

0.05 | 0.25 | 0.50 | 0.75 | 0.95 | ||||

(1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9) |

TDTA | 2.170 | 6.412 | −0.268 | 0.831 | 0.183 | 0.889 | 5.411 | 8.090 |

0.097 * | (0.004) *** | (0.864) | (0.576) *** | (0.879) | (0.612) | (0.014) ** | (0.004) *** | |

LTDTA | −3.448 | −1.277 | −2.965 | 0.196 | −0.854 | −3.299 | −3.805 | −6.962 |

0.065 * | (0.074) * | (0.096) * | (0.084) * | (0.620) | (0.252) | (0.309) | (0.097) * | |

STDTA | −4.441 | −6.134 | −1.054 | 1.452 | −0.683 | −3.823 | −7.181 | −8.797 |

0.012 ** | (0.138) | (0.059) * | (0.413) | (0.623) | (0.133) | (0.039) ** | (0.080) * | |

SIZE | 0.551 | 0.766 | 0.445 | 0.351 | 0.376 | 0.423 | 0.746 | 1.330 |

0.001 *** | (0.014) ** | (0.028) ** | (0.002) *** | (0.007) *** | (0.082) * | (0.029) ** | (0.009) *** | |

LQDTY | −0.134 | −0.182 | −0.122 | −0.098 | −0.059 | −0.110 | −0.188 | −0.192 |

0.000 ** | (0.000) *** | (0.002) *** | (0.142) | (0.185) | (0.002) *** | (0.000) *** | (0.000) *** | |

GOP | 3.255 | 1.930 | 2.344 | 1.632 | 3.101 | 3.248 | 2.853 | 3.655 |

0.002 *** | (0.147) | (0.100) * | (0.309) | (0.008) *** | (0.005) *** | (0.056) * | (0.373) | |

RGDP | −0.284 | −0.072 | −0.285 | −0.675 | −0.244 | −0.608 | −0.353 | −0.162 |

0.190 | (0.754) | (0.210) | (0.170) | (0.250) | (0.052) * | (0.327) | (0.710) | |

INF | −0.103 | −0.090 | 0.541 | 0.145 | −0.088 | −0.114 | −0.333 | −0.244 |

0.451 | 0(.705) | (0.004) *** | (0.407) | (0.611) | (0.636) | (0.205) | (0.217) | |

_Cons | 5.767 | −0.273 | 14.808 | 2.993 | 3.392 | 8.866 | 6.625 | 3.813 |

0.073 | (0.097)* | (0.000) *** | (0.382) | (0.117) | (0.032) ** | (0.135) | (0.637) |

© 2017 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (http://creativecommons.org/licenses/by/4.0/).

## Share and Cite

**MDPI and ACS Style**

Siddik, M.N.A.; Kabiraj, S.; Joghee, S.
Impacts of Capital Structure on Performance of Banks in a Developing Economy: Evidence from Bangladesh. *Int. J. Financial Stud.* **2017**, *5*, 13.
https://doi.org/10.3390/ijfs5020013

**AMA Style**

Siddik MNA, Kabiraj S, Joghee S.
Impacts of Capital Structure on Performance of Banks in a Developing Economy: Evidence from Bangladesh. *International Journal of Financial Studies*. 2017; 5(2):13.
https://doi.org/10.3390/ijfs5020013

**Chicago/Turabian Style**

Siddik, Md. Nur Alam, Sajal Kabiraj, and Shanmugan Joghee.
2017. "Impacts of Capital Structure on Performance of Banks in a Developing Economy: Evidence from Bangladesh" *International Journal of Financial Studies* 5, no. 2: 13.
https://doi.org/10.3390/ijfs5020013