Capital Structure and Firm Performance: A Comparative Study between Islamic Banks and Conventional Banks

Abstract

There will always be a correlation between company performance and capital structure, but the relationship in context with the two different groups of banks has been the main theme of this study. For this purpose, 10 different research banks are selected, including 5 conventional banks and 5 Islamic banks operating in Pakistan. The variables of the study are the return on assets, return on equity and earnings per share, while the independent variables of the study are the leverage ratio, the relationship between equity and total assets, the ratio between total debt and total assets and growth ratio. Data are taken from banks' annual financial reports. The type of data used in the investigation is secondary data from the 2013-2018 period. Regression analysis is used in the research to analyze the effect of independent variables on dependent variables. Regression analysis will be performed using E views. The results show that there is a relationship between the capital structure and the performance of the company. Second, there is a difference between the capital structure and the strong performance of Islamic and conventional banks