Capital structure and financial performance of selected commercial banks listed on Uganda Securities Exchange
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Date
2017-09
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Publisher
Kampala International University, College of Economics and Management
Abstract
Capital structure and financial performance of selected commercial banks listed on Uganda Securities Exchange have received much attention in recent times, this is in light of realisation that what is now popularly referred to as capital structure. The study was based on the following four objectives; (i) to examine the effect of short term debt financing on the financial performance; (ii) to examine the effect of long term debt financing on the financial performance; (iii) to examine the effect of retained earnings on the financial performance; and (iv) to examine the effect of shareholders’ capital on the financial performance of selected commercial banks listed on USE. The study employed longitudinal research design and methodology used was only quantitative. The study employed panel data of 5 commercial banks listed on USE over the period of 2010-2015. The findings revealed that; short term debt positively and insignificantly affects financial performance (β=0.000, Sig=0.710); long term debt financing positively and insignificantly affects financial performance (β=0.001, Sig=0.523); retained earnings are negatively and insignificantly related to financial performance (β=-0.003, Sig=0.483); and finally shareholder’s capital is negatively and insignificantly related to financial performance of selected commercial banks listed on USE (β=-0.001, Sig=0.128). The study concluded that; short term debt has a positive insignificant effect on financial performance; long term debt financing has a positive insignificant effect on financial performance; retained earnings have a negative insignificant effect on financial performance; and shareholder’s capital has a negative insignificant effect on financial performance of selected commercial banks listed on USE. The study recommended that; management of each commercial bank should consider the use of more short term debt and long term debt in their capital structure mix to increase their financial performance; should however, use less of retained earnings and share capital in financing their overall operations to increase their financial performance. Contribution of knowledge was gained from findings whereby other variables like bank size and growth opportunities contribute towards the financial performance of commercial banks, management have priorities set to meet their objectives and the study helped society on interpretation of figures of selected commercial banks.
Description
A research thesis submitted to the college of economics and management in partial fulfilment of the requirement for the award of Master’s Degree in Business Administration-Finance and Accounting of Kampala International University Kampala, Uganda
Keywords
Capital structure, Financial performance, Commercial banks, Uganda Securities Exchange