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Review of literatures

1. Zarfar et al(2016) investigated to acknowledge whether capital structure is an appropriate


policy to bring in the financial sector especially in the banking sector of Pakistan. Sample
of study include 25 banks, which are listed at schedule banks in state bank of Pakistan.
Multiple regression models are used to estimate the relationship between capital structure
and banking performance. Findings of the study authenticated a positive relationship
between determinants of capital structure and performance of banking industry.
2. Njeri and Kagiri(2013) determined the effect of capital structure to the companys
financial performance of the listed banking institutions in Nairobi Securities Exchange.
The Specific objectives of the was to establish how debt, leverage risk, interest rate and
debt equity combinations affect performance of banking institutions listed in the Nairobi
Securities Exchange. The study made use of descriptive research study design and data
was collected using questionnaires which were managed to the management of the
selected banks under study. Correlation and multiple regression analysis were used for
analysis. The study findings indicate that there is a insignificant positive relationship
between the factors under study and financial performance of commercial banks listed at
the Nairobi Securities Exchange.
3. Rajha et al (2014) investigated the impact of capital structure on the performance of the
Jordanian Islamic Banks, through the using multiple regression model. The model
included a sample of two Islamic banks: Jordan Islamic Bank (JIB) and Islamic
International Arab bank. The sample of the study relied on annual statements of Islamic
bank for the period (1998-2012), the result was, had negative impact on performance, and
there is no impact to the Ratio of liquid Assets of Total asset on the performance of
Islamic banks in Jordan.
4. Vitor and Badu (2012) empirically investigate the relationship between capital structure
or leverage and performance of listed bank in Ghana From 2000 to 2010. Data was
collected from Ghana stock exchange and annual report of the listed banks. Regression
methodology was used to analysis the data. The result was that the banks listed on the
Ghana Stock Exchange are highly geared and this is negatively related to the banks
performance.
5. Anarfo(2015) examined the relationship between capital structure and bank performance
in Sub-Sahara Africa. This study has employed the use of panel data techniques to
analyze the relationship between capital structure and bank performance. The
performance variables used in the study were return on asset, Return on equity and net
interest margin .The results from Levin-Lin-Chu and Im-pesaran-shin unit root test show
that all the variables were stationary in levels. The study hypothesized negative
relationship between capital structure and bank performance.
6. Khalaf Taani(2013) examined the impact of capital structure on performance of Jordanian
banks. the annual financial statements of 12 commercial banks listed on Amman Stock
Exchange were used for this study which covers a period of five years from 2007-2011.
Multiple regression was applied on performance indicators such as Net Profit, Return on
Capital Employed, Return on Equity and Net Interest Margin as well as Total Debt to
Total funds and Total Debt to Total Equity as capital structure variables. Multiple
regression models are applied estimate the relationship between capital structure and
banking performance. The results show that bank performance which is measured by net
profit, return on capital employed and net interest margin is to be significantly and
positively associated with total debt while total debt is found to be insignificant in
determining return on equity in the banking industry.
7. Nikoo(2015) Investigated Impact of Capital Structure on Banking Performance in stock
exchange Tehran. Based on financial statements of Iranian banks for the period 2009-
2014. The study established a model to measure the effect of capital structure on the bank
efficiency measured by return on assets, return on equity and earnings per share. It is
found that capital structure has positive impact on bank performance. The significant
levels are positive between dependent variable and independent variable.
8. Saheed et al(2013) examined the impact of capital structure on performance of Pakistani
banks. Work on capital structure determinants of banks within country over the period of
five years from 2007 to 2011 by using data of banks listed at Karachi stock exchange.
Multiple regression models are applied to estimate the relationship between capital
structure and banking performance. Performance is measured by return on assets, return
on equity and earnings per share. Determinants of capital structure includes long term
debt to capital ratio, short term debt to capital ratio and total debt to capital ratio.
Findings of positive relationship between of capital structure and performance of
banking industry.
9. Kuria(2010)determined if capital structure does have any effect on the financial
performance of commercial banks in Kenya. conducted on 35 commercial banks in
Kenya which were in operation in Kenya for the five years of study from 2008 to 2012.
The various ratios of these commercial banks were computed from the various data
collected from the data extracted from their financial statement for the period. The data
was then analyzed using linear regression models. The finding of the analysis concluded
that there is no significant relationship between the capital structure and the financial
performance of commercial banks in Kenya.
10. ( Hailu) examined the impact of capital structure on profitability of core business
operations of commercial banks in Ethiopia. Data were obtained from the audited
financial statements of eight commercial banks and National Bank of Ethiopia for the
period of twelve years (2001/02 2012/13). The findings that capital structure as
measured by total debt to asset had statistically significant negative impact, whereas
deposit to asset had statistically significant positive impact on profitability of core
business operations of commercial banks.
11. Javed et al(2014) attempted was made to analyze the impact of capital structure on firm
performance of 63companies listed on Karachi Stock Exchange. Data comprised of 5
years, 2007 to 2011. Balance Sheet Analysis issued by State Bank of Pakistan was used
for data collection. Fixed Effects Model was used regression model to find the
relationship between firm performance and capital expenditure. Results showed that is a
relationship but direction of the relationship was mixed. Capital structure showed positive
impact on firm performance when return on assets was used as dependent variable. When
return on equity was used as dependent variable then debt over assets ratio showed
positive impact but equity over assets ratio and long term debts over assets ratio revealed
negative impact over dependent variable and when return on sales was used as dependent
variable.
12. Adesina et al(2015) Capital structure has been found to have impact on firm performance.
Bank in Nigeria has increased bank equity capital and debt, Determined the impact of
capital structure on the financial performance of Nigeria banks. Used profit before tax as
a dependent variable and two capital structure variables (equity and debt) as independent
variables. The sample for the study consists of ten (10) Nigerian banks quoted on the
Nigerian Stock exchange and period of eight (8) years from 2005 to 2012.Ordinary least
square regression analysis of secondary data shows that capital structure has a significant
positive relationship with the financial performance of Nigeria quoted banks.
13. Gokul G(2013) established the effects of capital structure on financial performance of
listed firms on Bombay Stock Exchange. The financial performance was measured in
terms of return on equity while capital structure was measured in terms of debt ratio. The
period of study was 2012 and 2013. The population of study consisted of 10 listed Banks.
The data required for the study were collected from Annual Reports of the Companies.
The annual reports of the sample companies have been downloaded from the database
www.insight.asiancerc.com. Data analysis was done by use of one way ANOVA.
The results obtained reveal that there was an inverse relationship between capital
structure and financial performance of listed firms in BSE. The findings indicate that the
higher the debt ratio, the less the return on equity which therefore supports the need to
increase more capital injection rather than borrowing, as the benefits of debt financing are
less than its cost of funding.

Objective of Study:
Impact of capital structure on banking performance in India, relationship between equity
and banking performance, relationship between debt and banking performance.

Research Methodology
In this research we are going to use multiple regressions and the sample of research is 20
banks financial statements for a period of ten years from 2007 to 2017. The banks will be
from Bombay Stock Exchange (BSE).Top 20 banks in terms of market capitalization,
which public sectors or private sectors have established a huge capitalization. Debt
Equity ratio as well as P.E ratio will also be applied and evaluation on the basis of this
will be performed.