Impact of capital structure, liquidity on the profitability of listed deposit money banks (DMBS) in Nigeria: The pecking order theory perspective

There have been divergent views on the impact of capital structure and corporate liquidity on profitability of firms and this was a stimulant to this study in order to find out the reality. The main objective of the study was to examine the impact and relationship of capital structure and liquidity on the profitability of listed deposit money banks in Nigeria for the period of 2005-2014. The study used ex-post factor and correlational research designs. The population of the study was the 17 listed deposit money banks in Nigeria as at 2014 and a sample size of 9 banks was obtained using Taro Yamane adjusted formula. Secondary data was collected from audited annual reports and accounts of the 9 banks used. The study used panel multiple linear regression and correlation as techniques of data analysis because they are good techniques use in measuring impact and relationship. It was found that capital structure and liquidity has positively and significantly influenced the profitability of listed deposit money banks in Nigeria which implies that a relationship exist between the variables. The study concludes that, capital structure and liquidity plays a crucial role on the profitability of listed deposit money banks in Nigeria because it determines the survival and growth of the banks. It is recommended that, the management of listed deposit money banks in Nigeria should strike a balance between the proportion of their debt and equity since it contributes a lot to the banks' profitability and they should adhere strictly to CBN directives on liquidity for maintaining a prevailing percentage of their total customers deposit as liquidity as this would assist them in achieving their short-term objectives and prevent the tied up of capital but the percentage depends on the prevailing percentage given by the CBN at a particular period of time penetration, Product line development