Open AccessCAPITAL STRUCTURE AND INTEREST RATE AS DETERMINANTS OF PROFITABILITY AND EFFICIENCY OF THE PHILIPPINE BANKING SECTOR: THE CASE OF UNIVERSAL AND COMMERCIAL BANKS
Author(s) -
Arjay V Artes,
Assoc. Prof. Ricardo L. Dizon
Publication year - 2020
Publication title -
epra international journal of economic and business review
Language(s) - English
Resource type - Journals
eISSN - 2349-0187
pISSN - 2347-9671
DOI - 10.36713/epra2951
Subject(s) - return on equity , return on capital , cost of capital , return on capital employed , capital adequacy ratio , risk adjusted return on capital , return on assets , equity capital markets , business , economics , interest rate , monetary economics , rate of return , profitability index , financial system , financial capital , finance , capital formation , valuation (finance) , microeconomics , profit (economics)
This study examined the influence of capital structure and interest rate as determinants of profitability and efficiency of universal and commercial banks in the Philippines. The researcher uses equity capital and debt capital to measure capital structure, and return on asset, and return on equity as a measure of efficiency and profitability respectively. The method used to summarize the relationship of these banks was Multivariate Regression Analysis. The results shows that capital and interest rate have significant effect to return on asset and return on equity by showing a p-value of less than five percent in the regression analysis. Capital structure in terms of debt capital has negative effect while equity capital shows positive impact to ROA and ROE. Moreover, interest rate also shows a negative effect to the performance of banks. Thus, the paper recommends universal and commercial banks should strengthen their efforts to depend on internally generated funds as their source of finance. KEYWORDS: Universal banks, Commercial banks, Return on asset, Return on equity, Interest rate