The Impact of Capital Structure on Bank Performance in Turkiye

Abstract

The aim of this study is to examine the impact of capital structure on Turkish banking performance by using panel regression model for the period between 2012 and 2023. The ratio of return on assets (ROA) and return on equity (ROE) are used as a dependent variable which are one of the important indicators of the banking performance. There are 9 bank-spesific and 2 macroeconomic (inflation and economic growth) independent variables in the analysis. Panel data analysis results reveal that the capital structure [Debt ratio (DTA) and Debt to equity ratio (DTE)] negatively impacts business performance (ROA) of Turkish private deposit banks. The financial performance, which is measured by ROA, is significantly and negatively associated with variables such as Non-Performing loan ratio (NPL), credit risk (CIR) and cost management (OA), whereas effect of bank size (BS), economic growt (GDP) and inflation (INF) have positive impact. On the other hand, the effects of DTA, DTE, BS, NPL, CIR, OA and GDP on ROE are significant. Besides, the effects of DTA, BS and GDP are positive, whereas the effect of DTE, NPL, CIR and OA are negative. The study concludes that the capital structure proxies have impact on financial performance of Turkish private deposit banks measured both by return on assets and return on equity.