The Impact of Capital Structure on Banks’ Profitability in Africa

Abstract

This paper investigates the impact of capital structure on the profitability of banks in Africa. Using dynamic panel regression robust analysis and data from 37 countries in SSA, the study employed the Debt Ratio (DR) as a measure of capital structure; whereas banks’ profitability was measured using Risk Adjusted Return on Asset (RAROA), Risk Adjusted Return on Equity (RAROE) and Net Interest Margin (NIM). The findings suggest that, banks’ capital structure is a driver of profitability. Other variables that significantly influence banks’ profitability are size, tangible asset, growth, taxes and interest rate.