Abstract:
This research study intends to investigate the impact of capital structure on
performance of IB’s to furnish direction to (finance) bank managers for maximizing
capital. In Pakistan banking industry Islamic banks (IB’s) are confronting a trade-off
between high capital ratio that increase the safety and soundness of Islamic banks
(IB’s) or lower the required return of investors. The managers of Islamic banks
(IB’s) must decide carefully the suitable combination of equity and debt (optimal
capital structure) to compete with domestic and global markets and increase the
profitability of Islamic banks. Thus the sample of five Islamic banks are uses in the
context of Pakistan banking industry, multiple regression analysis method are uses
to examine the performance factors of Islamic banks (IB’s).The findings indicates
that the capital ratio has statistically insignificant and total debt to total equity ratio
has statistically significant response on the perfonnance of Islamic banks(IB’s).
While size is insignificant variables. .Due to constraints of market data this research
is conducted by utilizing accounting ratios. Future research can be done by
availability of market data to evaluate the performance.
