Assessing the impact of capital structure on the performance of banks in the Arab nation
Keywords:
banks; capital structure; return on asset; return on Equity; feasible generalized least squaresAbstract
The vital role of capital structure in the performance of banks cannot be overemphasized, as several studies have investigated the capital structure-performance nexus across different economies and sectors. However, the findings of these studies are mixed or inconclusive. In addition, there is a relative deficiency of empirical studies examining the capital structure performance of bank linkage in Morocco. This study fills this gap, employing the pooled data of 4 Moroccan banks from 2010 through 2023. This study empirically examined the impacts of capital structure on the performance of four (4) Moroccan banks assessed by return on equity and return on assets. The results of the feasible generalized least squares showed that capital structure has mixed interactions with performance, as some of the capital structure proxies depict positive and negative linkages. The findings of this empirical study are of greater significance as they provide valuable insights for financial managers and regulators by enhancing their understanding of the complex processes that influence the performance of banks in Morocco.
References
1. Lachaari M, Benmahane M. The Capital Structure Impact on Banking Financial Performance: Evidence from Morocco. Journal of Entrepreneurship & Business. 2022; 3(2): 62-67. doi: 10.24123/jeb.v3i2.4965
2. Khan S. The impact of capital structure on bank performace in emerging markets; empirical evidence from GCC countries. Financial Internet Quarterly. 2022; 18(1): 56-65. doi: 10.2478/fiqf-2022-0005
3. Al Omari R. The Impact of Capital Structure on Jordanian Banks Performance. Journal of Social Sciences (COES&RJ-JSS). 2021; 10(1): 35. doi: 10.25255/jss.2021.10.1.35.47
4. Zaiane S, Moussa FB. What Drives Banking Profitability During Financial Crisis and Political Turmoil? Evidence from the MENA Region. Global Journal of Emerging Market Economies. 2021; 13(3): 380-407. doi: 10.1177/09749101211031102.
5. Imas Iyoha AO, Ohiokha G, Umoru D, et al. Target capital structure for managerial decision making: Dynamics and determinants. Investment Management and Financial Innovations. 2022; 19(3): 322-334. doi: 10.21511/imfi.19(3).2022.27
6. Modigliani F, Miller MH. The Cost of Capital, Corporation Finance and the Theory of Investment. The American Economic Review; 1958.
7. Begum H, Rimu S, Ara J. Impact of capital structure on bank performance: a study on janata bank limited of bangladesh. Journal of Science and Technology. 2022; 20(2): 92-99. doi: 10.59125/jst.20211
8. Akkas E, Asutay M. The impact of intellectual capital formation and knowledge economy on banking performance: a case study of GCC’s conventional and Islamic banks. Journal of Financial Reporting and Accounting. 2022; 21(5): 1149-1170. doi: 10.1108/jfra-08-2021-0251
9. Zahid A, Das Gupta C, Hidayah R, et al. Impacts of Capital Structure on Performance of Islamic and Conventional Banks: Evidence from Bangladesh. International Journal of Research and Innovation in Social Science. 2022; 06(01): 539-544. doi: 10.47772/ijriss.2022.6130
10. Acharya A, Nepal B, Kafle AR. Exploring Higher Capital Requirements in Nepal Under Basel III: A Qualitative Approach. International Journal of Qualitative Research. 2023; 2(3): 195-205. doi: 10.47540/ijqr.v2i3.755
11. Pyka I, Nocoń A. Bank Risk Capital and Its Effectiveness in Selected Euro Area Banking Sectors. Journal of Risk and Financial Management. 2021; 14(11): 555. doi: 10.3390/jrfm14110555
12. Pham NH, Hoang TM, Pham NTH. The impact of capital structure on bank profitability: evidence from Vietnam. Cogent Business & Management. 2022; 9(1). doi: 10.1080/23311975.2022.2096263
13. Khan S, Bashir U, Islam MdS. Determinants of capital structure of banks: evidence from the Kingdom of Saudi Arabia. International Journal of Islamic and Middle Eastern Finance and Management. 2020; 14(2): 268-285. doi: 10.1108/imefm-04-2019-0135
14. Sobol I, Dopierała Ł, Wysiński P. Is the profitability of Islamic and conventional banks driven by the same factors?—A study of banking in the Middle East. Özen E, ed. PLOS ONE. 2023; 18(8): e0289264. doi: 10.1371/journal.pone.0289264
15. Li Q, Chen H. The impact of debt financing on bank profitability: Evidence from a panel of international banks. International Journal of Finance and Economics. 2023.
16. Kılıç M, Aydıngülü Sakalsız S. Analysis of the validity of trade-off and pecking order theories in capital structure decisions of sustainable companies. Kahramanmaraş Sütçü İmam Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi. 2023; 13(2): 29-46. doi: 10.47147/ksuiibf.1379933
17. Shahriar A, Mehzabin S, Azad MAK. Diversification and bank stability in the MENA region. Social Sciences & Humanities Open. 2023; 8(1): 100520. doi: 10.1016/j.ssaho.2023.100520
18. Mabkhot H, Al-Wesabi HAH. Banks’ Financial Stability and Macroeconomic Key Factors in GCC Countries. Sustainability. 2022; 14(23): 15999. doi: 10.3390/su142315999
19. Hakimi A, Boussaada R, Karmani M. Are financial inclusion and bank stability friends or enemies? Evidence from MENA banks. Applied Economics. 2021; 54(21): 2473-2489. doi: 10.1080/00036846.2021.1992342
20. Hoque H, Liu H. Capital structure of Islamic banks: How different are they from conventional banks?. Global Finance Journal. 2022; 54: 100634. doi: 10.1016/j.gfj.2021.100634
21. Daoud Y, Kammoun A. Financial stability and bank capital: the case of islamic banks. International Journal of Economics and Financial Issues. 2020; 10(5): 361-369. doi: 10.32479/ijefi.10147
22. Mimouni K, Temimi A, Goaied M, et al. The Impact of Liquidity on Debt Maturity After a Financial Crisis: Evidence from the Gulf Cooperation Council Region. Emerging Markets Finance and Trade. 2018; 55(1): 181-200. doi: 10.1080/1540496x.2018.1425835
23. Masera R, Mazzoni G. On the non-neutrality of the financing policy and the capital regulation of banking firms. Studies in Economics and Finance. 2016; 33(4): 466-487. doi: 10.1108/sef-09-2014-0179
24. Siddik MNA, Kabiraj S, Joghee S. Impacts of Capital Structure on Performance of Banks in a Developing Economy: Evidence from Bangladesh. International Journal of Financial Studies. 2017; 5(2): 13. doi: 10.3390/ijfs5020013
25. Rahman MT. Testing trade-off and pecking order theories of capital structure: evidence and arguments. International Journal of Economics and Financial Issues. 2019; 9(5): 63-70. doi: 10.32479/ijefi.8514
26. Albart N, Purnomo H. The Influence of Asset Structure and Capital Structure on Return on Assets. Kontigensi: Jurnal Ilmiah Manajemen. 2024; 12(1): 269-282. doi: 10.56457/jimk.v12i1.536
27. Simanullang CD, Edward YR, Ginting RR, et al. The effect of return on assets (roa) and return on equity (roe) on company value with capital structure as moderating variables in banking companies listed on the indonesia stock exchange. International Journal of Business, Economics and Law. 2021.
28. Surjandari DA, Nurlaelawati L, Soma AM. Asset, capital structure, liquidity, firm size’s impact on stock return. International Journal of Commerce and Finance. 2020.
29. Gill A, Biger N, Mathur N. The effect of capital structure on profitability: Evidence from the United States. International journal of management. 2011.
30. Salim M, Yadav R. Capital Structure and Firm Performance: Evidence from Malaysian Listed Companies. Procedia-Social and Behavioral Sciences. 2012; 65: 156-166. doi: 10.1016/j.sbspro.2012.11.105
31. Gikombo EM, Mbugua D. Effect of select macro-economic variables on performance of listed commercial banks in Kenya. International Academic Journal of Economics and Finance. 2018.
32. Okeahalam CC. Foreign Ownership, Performance and Efficiency in the Banking Sector in Uganda and Botswana. Studies in Economics and Econometrics. 2004; 28(1): 89-117. doi: 10.1080/10800379.2004.12106362
33. Chen J, Jiang C, Lin Y. What determine firms’ capital structure in China?. Managerial Finance. 2014; 40(10): 1024-1039. doi: 10.1108/mf-06-2013-0163
34. Hang M, Geyer-Klingeberg J, Rathgeber AW, et al. Measurement matters—A meta-study of the determinants of corporate capital structure. The Quarterly Review of Economics and Finance. 2018; 68: 211-225. doi: 10.1016/j.qref.2017.11.011
35. Lemmon ML, Zender JF. Debt Capacity and Tests of Capital Structure Theories. Journal of Financial and Quantitative Analysis. 2010; 45(5): 1161-1187. doi: 10.1017/s0022109010000499
36. Chang C, Lee AC, Lee CF. Determinants of capital structure choice: A structural equation modeling approach. The Quarterly Review of Economics and Finance. 2009; 49(2): 197-213. doi: 10.1016/j.qref.2008.03.004.
37. Chadha S, Sharma AK. Determinants of capital structure: an empirical evaluation from India. Journal of Advances in Management Research. 2015; 12(1): 3-14. doi: 10.1108/jamr-08-2014-0051
38. Danisman GO, Demir E, Zaremba A. Financial resilience to the covid-19 pandemic: the role of banking market structure. Applied Economics. 2021; 53(39): 4481-4504. doi: 10.1080/00036846.2021.1904118
39. Kovacova M, Krajcik V, Michalkova L, et al. Valuing the Interest Tax Shield in the Central European Economies: Panel Data Approach. Journal of Competitiveness. 2022; 14(2): 41-59. doi: 10.7441/joc.2022.02.03
40. Rao PK, Shukla A. Strategic sustainability in Indian banking industry: a performance analysis. International Journal of Productivity and Performance Management. 2023; 73(6): 2016-2034. doi: 10.1108/ijppm-04-2023-0199.
Downloads
Published
Issue
Section
License
Copyright (c) 2025 Author(s)
This work is licensed under a Creative Commons Attribution 4.0 International License.
