Effects of Capital Structure on the Performance of Banks Listed at the Dar es Salaam Stock Exchange

Mutahyoba Deusdedith Baisi

doi:10.71097/IJSAT.v16.i4.9480

Effects of Capital Structure on the Performance of Banks Listed at the Dar es Salaam Stock Exchange

Author(s)	Dr. Mutahyoba Deusdedith Baisi
Country	Tanzania
Abstract	The study assessed the effects of capital structure on financial performance of the banks listed at Dar es Salaam Stock Exchange using panel data of six commercial banks. Bank size and NPL were used as control variables. Various models and tests were carried out. The problem of cross-sectional dependence existed which resulted in the use of the Group Mean result that successfully produced the final result used for estimation purposes. The Group Mean model result considered ROA and ROE as the two measures of performance model both in the long run and short run. The Group Mean result on ROA model found that short term debt, long term debt and share capital affect the financial performance of tire two listed banks while short term debt, retained earnings and share capital affect the performance of tire one listed banks. Retained earnings for tire two banks and long term debt for tire one bank have an insignificant effect on ROA. Short term debt, long term debt, retained earnings and share capital were found to affect the performance of listed banks with NPL <= 5% while long term debt, retained earnings and share capital affect ROA for banks with NPL > 5% and short term debt has an insignificant effect. The results of the Group Mean result on the ROE model show that short term debt, retained earnings and share capital significantly affect the financial performance of tire two listed banks. Short term debt, long term debt, retained earnings and share capital significantly affect the performance of tire one listed banks. On the other hand, only changes in retained earnings were found to have a significant effect on performance of listed banks with NPL <= 5% and for banks with NPL > 5% retained earnings and share capital were found to have significant effects. It is recommended that banks should focus on raising funds to finance assets using short term debt financing, equity financing obtained from stock market or capital injection and effective utilization of retained earnings. It is further recommended that banks should reduce the use of long term debt in financing assets due to their cost implication in form of interest payments.
Keywords	Capital Structure, Commercial Banks, Performance, Portfolio management
Field	Sociology > Banking / Finance
Published In	Volume 16, Issue 4, October-December 2025
Published On	2025-11-21
DOI	https://doi.org/10.71097/IJSAT.v16.i4.9480
Short DOI	https://doi.org/hbb8gt

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Effects of Capital Structure on the Performance of Banks Listed at the Dar es Salaam Stock Exchange

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