“The Nexus of Capital Structure and Profitability: Evidence from Janata Bank PLC”

Abstract

Capital structure, the mix of debt and equity used to finance a bank's operations, plays a crucial role in its profitability. This complex link has been the focus of extensive study, with differing conclusions depending on the particular context, which includes regulatory frameworks, economic situations, and bank-specific features. Around 2025, the "Basel III Endgame," the last stage of the Basel III reforms, is expected to go into effect. By requiring banks to keep more capital to cover any losses, these measures seek to further enhance bank capital requirements and improve resilience. A bank's desirable capital structure requires careful consideration. Higher equity might be costlier than debt, even if it offers stability. Although it raises financial risk, more debt can increase returns. Decisions on capital structure are heavily influenced by regulatory requirements. In order to maximize profitability and guarantee long term sustainability, banks must proactively manage their capital structure while considering their unique risk profile, operating climate, and regulatory landscape. In my report, I was working on the Capital Structure of State-Owned Commercial Bank. I have collected last Eleven-years financial data of State-Owned Commercial Bank about capital structure. The secondary data was provided to the financial statements of bank’s website. In my analysis I have showed a comprehensive overview about Capital structure in different phase of my report. In conclusion, I examine how capital structure affects banks' profitability. To evaluate the data, I utilized MS Excel. I additionally juxtaposed the association between capital structure and bank profitability using Stata software. I have determined the synopsis of my research's findings following examination and debate. Additionally, I have offered some suggestions on the JBPLC's capital structure.