Impact of Capital Structure and Corporate Governance on Financial Performance

Abstract

This study aims to examine the effect of capital structure and corporate governance on financial performance. For this purpose data has been taken from 2014 to 2018 on annual basis from financial sector of Pakistan. To find the relationship among capital structure i.e. debt/asset, deposits/total equity, deposits/total assets and corporate governance on firm performance through given proxies ROA and ROE. In order to find out the impact of capital structure and corporate governance on ROA and ROE we run fixed effect model and common effect model on panel set of data. The result shows that DA, DE, DT and CG have significant impact on ROE and ROA in financial sector of Pakistan. This study has various other practical implications which show that increase in capital structure increases profitability of banks