This study examines the influence of capital structure on the profitability of
some selected private commercial banks working in Bangladesh. We used long
term debt to equity ratio, Short term debt to equity ratio, total debt to total
equity ratio, long term debt to equity ratio, total debt to total asset ratio, asset
growth and firm size to measure capital structure. We used three indicators of
profitability such as return on asset, return on equity and earnings per share.
Applying multiple regression analysis we find that total debt to total equity
(TDTE) negatively influence both ROA and ROE, Long term debt to total equity
(LTDTE) negatively influences the ROE, Total debt to total asset positively
affect the ROE, Size of the banks negatively affect the ROA and EPS and finally
asset growth of the banks positively affect ROA, ROE and EPS. From this study,
it can be recommended that to increase the profitability the private commercial
banks in Bangladesh should use less debt in terms of equity, more debt in terms
of total assets. The banks can also be recommended to keep the banks size as
small as possible with expected positive growth in assets.
