DETERMINANTS OF CORPORATE CAPITAL STRUCTURE OF BANKS IN NIGERIA

Abstract

This study examine the determinants of corporate capital structure of banks in Nigeria. The analysis involves the use of two general known method namely; statistical and econometric methods in the view of providing a rich background for the investigation, using debt ratio (DEBT) as dependent variable and five enhancing determinants to include profitability, size, tangibility, tax, non-debt tax shield and liquidity (Proxy with Current ratio) as independent variables. A sample of 15 listed banks between 2012 and 2016 were inspected using descriptive statistics, correlation analysis and pooled regression technique. The various analyses were employed to observe the relationship between capital structure of banks and the various determinants in Nigeria.

Out of the five explanatory variables employed in this study only Liquidity which was proxy with current ratio and asset tangibilityproved to be good determinant of corporate capital structure of banks in Nigeria . The study also revealed that liquidity and asset tangibility and tax have a positive relationship with cash holding. We recommend among others; that the government and monetary authorizes should put policies in place to curb inflation in order to avoid unanticipated inflation, since unanticipated inflation reduces banks debt ratios because the cost of borrowing will be very high.