The Nexus between Capital Structure and Financial Performance of Banks: The Influence of COVID 19 in Tanzania

Abstract

The purpose of this study was to examine the nexus between capital structure and financial performance of commercial banks in Tanzania. Panel data were used to conduct the empirical study which was extracted from the annual reports of 25 selected commercial banks for the period from 2016 to 2020. Descriptive statistics, correlations, fixed effect, and random effect models were used for the data analysis. Then, with the results of the Hausman Specification Test, the fixed effect model was considered as the most suitable model to examine the relationship between capital structure and ROA.  Random effect model was considered as the most suitable model to examine the relationship between capital structure and ROE. This study was one of the very few studies which have investigated the nexus between capital structure and financial performance of commercial banks in Tanzania under COVID 19 impacts which gives the contribution to the existing finance literature.