DETERMINANTS OF CAPITAL STRUCTURE IN ISLAMIC BANKING A CRITICAL STUDY

Abstract

Purpose: This study analyzes the bond between dependent variable (Leverage) and Independent variables that are Growth, Tax rate, Regulation, Firm Size, and profitability, and how it affects any firm in terms of its capital structure. Methodology: This research is done to find the impact of determinants on capital structure decisions. Only Islamic banks are selected, which are listed in KSE. Time period which is selected for this study included data from 2008-2012. To analyze this research, ANOVA, Regression, Coffiecient, and Collinearity Test are applied. Findings: The results drawn from this research proves that Leverage is positively correlated with profitability, tax. And if we look opposite scenario, in which regulation, and firm size has a negative relationship with leverage. From regression results it shows that there is 42.7% impact of independent variables on dependent variables. Practical Implications: This study might help finance decision makers, economic and finance students, to understand the importance of determinant variable in making optimal capital structure of any firm. This study helps in order to give clear view of Islamic banking capital structure.