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The main purpose of this study was to explore the impact of capital structure (DE ratio) on financial performance of the firm, a case study of CRDB bank PLC Mwanza branch. The relation between return on equity (ROE) and capital structure, return on asset (ROA) and capital structure, earnings per share (EPS) and capital structure, as well as net profit margin (NP Margin) and capital structure for CRDB bank PLC for the previous fifteen years, 1998 to 2012 were investigated.
To a great extent, the researcher did use secondary data. It is where by the financial statements of CRDB for the previous fifteen consecutive years, alongside with other relevant publications were acquired by the researcher for analysis. This enabled the researcher to have the basis for comparison as to the financial performance of CRDB from one financial period to another in relation to its capital structure for the corresponding periods. For that case, most of the data were quantitative based. On the other hand, primary data were used to a small extent. This was achieved mainly through interviews with CRDB bank staff members. However the impact of primary data as gathered from interviews and other explanatory variables was held constant as control variables. Only the impact of capital structure was analysed.
The data collected was processed and analysed descriptively by the use of tables, graphs, charts as well as the computerized data processing package known as SPSS. Regression analysis was run so as to find out the extent in which one variable explains the other. After a thorough analysis, conclusion was derived which details that the capital structure of CRDB bank has insignificant impact on financial performance, as measured by such particular comparable ratios.
Finally recommendations were made as regards to the impact of capital structure on financial performance, as well as to the optimum level of capital structure through which CRDB bank can improve its financial performance. |
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