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Impact of Capital Structure on Profitability of Commercial Banks Listed on Karachi Stock Exchange

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  • Muhammad Ali Jibran Qamar
  • Sameen Masood
  • Muhammad Mohsin Khan

Abstract

This study investigates the impact of capital structure on the profitability of Pakistan commercial banks listed on Karachi Stock Exchange (KSE) by applying fixed and random effects on panel data of 15 listed Commercial Banks from 2005 to 2014.Profitability indicators such as Net profit margin, Return on capital employed, Return on equity and Net interest margin, Return on assets, Sustainable growth rate and Bank size. Debt to asset and Debt to equity used as capital structure. The results revealed that capital structure has negative impact on profit as increase in debt, increases the interest payments thus decline in profitability. Banks in Pakistan depend more on debt than equity capital and are highly lever aged institutions.

Suggested Citation

  • Muhammad Ali Jibran Qamar & Sameen Masood & Muhammad Mohsin Khan, 2016. "Impact of Capital Structure on Profitability of Commercial Banks Listed on Karachi Stock Exchange," International Journal of Empirical Finance, Research Academy of Social Sciences, vol. 5(2), pages 78-87.
    • Handle: RePEc:rss:jnljef:v5i2p2
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