Publication Details
Abstract
This research examined the correlation between capital structure and financial performance of Nigerian deposit money institutions. The performance criteria used were return on equity, return on assets, and the debt-to-equity ratio. Two well-defined questions and hypotheses guided the investigation. The study's methodology was based on a quasi-experimental setup. From 2012 to December 31, 2022, fourteen (14) deposit money institutions were part of the study population on the Nigerian Exchange Group (NGX).A large portion of the research was based on agency theory. Fact books, yearly reports of publicly traded deposit banks in Nigeria, and publications of the Nigerian Exchange Group (NGX) were the sources of secondary data utilized in the study. Mean, median, and standard deviation were some of the descriptive statistics used to examine the data. The impact of predictor variables on criteria measurements was examined by multiple regression analysis, and the association between independent and dependent variables was assessed using the product moment coefficient of correlation (PPMC). The analyses were conducted using version 23 of the Statistical Package for the Social Sciences. The analysis identified a significant negative association between debt to return on equity (ROE) and return on assets (ROA) among Nigerian publicly listed deposit money institutions. The study's results indicated a significant negative correlation between debt capital structure and both ROE and ROA. The data revealed a robust positive correlation between Equity (E) and both Return on Equity (ROE) and Return on Assets (ROA) concerning the financial performance of DMOs. Equity capital structure improves deposit-taking banks' financial performance, according to the study. It is recommended that DMOs refrain from using debt financing due to the negative impact it has on their financial performance measured by ROE and ROA, as shown in the research. Research indicates that Destination Marketing Organizations (DMOs) aiming to optimize returns via capital structure should choose equity financing over debt financing to enhance financial performance. The research recommended that the government must provide a conducive environment that fosters an equitable capital structure for the development of banks and other financial institutions