Impact of Capital Structure on Bank Performance; Evidence from Private Banks Listed In Tehran Stock Exchange

Abstract

The current study aims to analyze the impact of capital structure on listed Iranian banks performance. In this study, financial information of 20 banks has been used. The research will rely purely on accounting data of all banks for the period of 2012 to 2016 quarterly. In this research, to determine ideal model, between pool data model and panel data model, F-test was used. H0 of the test shows fitness of pool data model. If the pool model is fit, there would be no need to do Hausman test, although if panel data is fit, the model of fixed effects should be tested instead of random effects model, so that the best model for estimation is determined and this can be taken using Hausman test and H0 refers to fitness of random effects model. The regression model used to test the hypothesis is significant statistically. Results of research shows, the amount of coefficient of determination of the model is obtained to 0.740; meaning that 74% of variances of dependent variable have been explained by independent and control variables. LTD and STD indices as independent variables of model are significant statistically and this means that the results obtained from the sample can be generalized to whole population. Tobin s Q reports that there are significantly positive relationships between short term debt (STD) and long term debt (LTD). Coefficients of STD, LTD, TTD and Firm size also have positive relationship in the model and this means that there is significant and positive correlation between STD, LTD, TTD and Firm size on performance of banks. This positive influence of STD, SLT, and TTD on profitability of banks listed in Tehran Stock Exchange can be explained by the low cost for banks on debt fund.