Does Capital Structure Effects Profitability: Evidence from conventional and Islamic banking

Abstract

The current research study analyzed the effect of capital structure and
productivity performance of banking sectors. The study used the regression
and co-relation analysis to test the impact of capital structure on productivity
performance. The study divided the banking sector into two broad categories
such as, Conventional Banks and Islamic Banks over the sample period. For
the said purpose an economic model was developed for conventional and
Islamic banks. This model is based on Net Profit Margin (NPM) i.e. dependent
variable and explanatory variables such as Debt to Assets (DTA), Debt to
Equity (DTE), Total Capitalization Ratio (TCR) and Coverage Ratio (CR).
The results showed that Conventional Banks, DTA and DTE were statistical
significant for dependent variable NPM. While in case of Islamic Banks, DTE
and CR were statistically significant with positive signs and were contributing
reasonably well in the profitability