Abstract:
The general objective of this study is “to investigate the effect of capital structure on the
profitability of selected private commercial Banks in Ethiopia”.To meet the objectives of this
study,Explanatory research design was adopted. The sampling technique used in the research
was purposive. The panel data was obtained from the audited financial statements of ten private
commercial banks for the period of 2010G.C-2019G.C. The panel data fixed effect estimation
model wasapplied for the data analysis through statistical package STATA version 14. The
independent variables used for the study were total debt to total asset ratio (TDTA) and Total
loan to deposit (TLD.) Return on Asset and Return on Equitywere used as a dependent variable
to measure the profitability of these selected private commercial Banks and the control variables
were spread,and size (capital)of the Banks. The regression results show that Total debt to asset
ratio is statistically significant and negative for Return on Asset and statistically insignificant
and positive for Return on Equity, Total Loan to deposit ratio was also statistically insignificant
and negative for both Return on Asset and Return on Equity. Spread has statistically
insignificant and negative for both Return on Asset and Return on Equity. Based on the result
discussed above the researcher recommends it was better if these banks focus on capital
maximization.
