European Journal of Accounting, Auditing and Finance Research (EJAAFR)

EA Journals

ROE

The Effect of Capital Structure on the Financial Performance of Nigerian Quoted Conglomerates (Published)

This study investigated the effect of Nigerian banks’ capital structure on the performance of conglomerates quoted on the floor of the Nigerian stock exchange from 2011 to 2015. The paper identified four levels of dependent variables such as return on assets, ratio (ROA), return on equity ratio (ROE), assets turnover ratio (AT) and earnings per share whereas the independent variable is financial leverage. Essentially the paper sets out to determine the effect of capital structure on the above dependable variables hence return on assets of quoted conglomerates, return on equity of quoted conglomerates, asset turnover of the quoted conglomerates and on the earnings per share of quoted conglomerates. Descriptive statistics and the pooled ordinary least square (POLS) regression analytical method were used for data analysis. The study finds that capital structure has effect on both return on assets and asset turnover of the conglomerates but no effect on return on equity and earnings per share of the conglomerate. It is then concluded that an in-depth analysis of business factors which affect a particular industry should be considered so as to obtain the benefits of the debt-equity mix. The result of the study is in agreement with most previous studies on other sectors that discovered mixed results on the effect of capital structure on financial performance. It is therefore necessary to employ a critical analysis of the appropriate debt-equity mix suitable for the company.

Keywords: Capital Structure, Financial Leverage, POLS, ROA, ROE, conglomerates

The Effect of Ffinancial Lleverage through Debt Ratio and Equity Ratio on ROE In Jordanian’s Banking Sector (Review Completed - Accepted)

Banks total funding costs will increase accordingly if their equity ratio is increased, higher equity ratio makes a bank’s debt more safe and lowers the required return on debt. Taking these into account the Modigliani-Miller implied that a bank’s total cost of funding should not be affected by the bank’s equity ratio.

This study is conducted to investigate the effect of financial leverage through debt ratio and equity ratio on return on equity (ROE). For the analysis the simple liner regression cover a period 2008-2011, used to examine the extent that the financial leverage effect ROE among Jordanian Banking sector. The study found that the Jordan Islamic Bank has the highest debt ratio, and the Capital Bank of Jordan has the lowest Debt ratio, and Capital Bank of Jordan has the highest equity ratio, and the Jordan Islamic Bank has the lowest equity ratio, also the Capital Bank of Jordan has the highest ROE, and the Jordan Kuwait Bank has the lowest ROE.

The study revealed that there is significant effect of debt ratio on dependent variable return on equity (ROE), and there is significant effect of equity ratio on dependent variable return on equity (ROE), and there is significant effect of independent variable financial leverage through debt ratio and equity ratio on dependent variable return on equity (ROE) among Jordanian Banking sector.

 

 

Keywords: Amman Stock Exchange (ASE), Debt Ratio, Equity Ratio, ROE

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