Determinants of capital structure of private commercial banks in Ethiopia

Abstract

Given the central role of market and credit risk in their core business, the success of Banks depend on their ability to identify, assess, monitor and manage these risks in a Sound and sophisticated way. In order to assess and manage risks, banks must have Effective ways of determining the appropriate amount of capital that is necessary to absorb unexpected losses arising from their market, credit and operational risk exposures.The objective of this study was to find out the determinants of capital structure of private Commercial banks in Ethiopia. The study used inferential research design. The population of this study was all the 18 commercial banks in Ethiopia. Secondary data was drawn from the financial statements of commercial banks. The data was analyzed using descriptive analysis and multiple regression analysis. The study found that overall leverage of banks is negatively related to operating assets. In conclusion, the empirical evidence from this study suggests thatSize, tax and liquidity are important variablesthat influence banks‟ capital structure