Abstract:
This study aimed at analyzing the effect of capital structure on banks profitability the case of
selected Ethiopian private commercial banks with the specific objectives of identifying effect of
capital structure on banks profitability the case of selected Ethiopian private commercial banks
in the study area. Secondary data were collected from sample banks for the period 2013 to 2023.
In addition, to achieve the objectives explanatory research design with mixed research approach
were used. The analysis was made using descriptive statistics like chi-square and t-tests to
compare the variables with of capital structure on banks profitability and econometric analysis
by regression model to analyze the effect of capital structure on banks profitability.
Furthermore, two dependent variables Return on Asset and Return on equity were selected as
profitability measurement and three independent variables Debt to asset ratio, Debt to equity
ratio and Interest coverage ratio were selected as proxy for capital structure. Additionally, four
other independent variables Capital adequacy ratio, Bank Size, Inflation and Economic Growth
Rate are incorporated into the models. Main finding debt to asset, debt to equity, interest
coverage, Capital adequacy, Bank Size, Inflation and Economic Growth Rate. Focus on
explaining the findings related to Debt to asset ratio, Debt to equity ratio and Interest coverage
ratio in both models. Hence, it is believed that these findings will be an important innovative for
future research and policy formulation in Ethiopia as it provide firsthand information about
effect capital structure on banks profitability in the study area
