Effect Of Long Term Loans On The Capital Structure Of Banks (A Study Of Access Bank Plc)

ABSTRACT

There has been an argument on whether long term loans affect the capital structure of commercial banks in Nigeria. To contribute to this argument, the study investigated the effect of long term borrowing on the debt ratio and debt equity ratio of commercial banks in Nigeria. The ex-post facto research design was adopted for the study and data were collected from the annual report and financial statement of account of Access Bank Nigeria Plc and internet for the period of 2005 to 2016. Thus, debt ratio and debt- equity ratio served as proxies for capital ratio and they served as dependent variables. The study employed Ordinary Least Square regression method to analyze the date collected. The result of date revealed that long term borrowing has a positive and significant effect on debt ratio and debt- equity ratio. In conclusion, the study argued that long term loans have a significant effect on capital structure of commercial banks in Nigeria. (Represented by Access Bank Nigeria Plc). The study recommended that low interest long term loan should be pursued by the commercial banks in Nigeria in their capital structure policy. 

TABLE OF CONTENTS

Title page ﾿ i

Declaration ﾿ ii

Certification ﾿ iii

Dedication ﾿ iv

Acknowledgement ﾿ v

List of tables ﾿ x

Abstract ﾿ xi

CHAPTER ONE

INTRODUCTION

1.1 ﾿ Background of the Study ﾿ 1

1.2 Statement of the Problem ﾿ 3

1.3Objectives of the Study ﾿ 4

1.4 ﾿ Research Questions ﾿ 4

1.5 ﾿ Research Hypotheses ﾿ 5

1.6 ﾿ Significance of the Study ﾿ 5

1.7 ﾿ Scope of the Study ﾿ 5 ﾿

1.8 ﾿ Limitations of the Study ﾿ 6

1.9 ﾿ Definition of Terms ﾿ 6

CHAPTER TWO

REVIEW OF RELATED LITERATURE AND THEORETICAL FRAMEWORK

2.1 Conceptual Framework ﾿ 8

2.1.1 Concept of Capital Structure ﾿ 8

2.1.2 Concept of Bank Loans ﾿ 10

2.1.1.1 Principles, Processes and Procedures of Granting Bank Loans ﾿ 11

2.1.1.2 Overview of Commercial Banks’ Loans to Key Sectors in Nigeria ﾿ 13 ﾿

2.2 Theoretical Framework ﾿ 15

2.2.1 Agency Theory ﾿ 15

2.2.2 Pecking Order Theory ﾿ 16

2.2.3 Trade-off Theory ﾿ 16

2.3 Empirical Literature ﾿ 17

CHAPTER THREE ﾿

RESEARCH METHODOLOGY

3.1 Research Design ﾿ 28

3.2 Sources of Data ﾿ 28 ﾿

3.3 Area of the Study ﾿ ﾿ 28

3.4 Model Specification ﾿ 29

3.5 Description of Variables ﾿ 31

3.6 Techniques of Data Analysis ﾿ 32

3.6.1 t-statistic ﾿ 32

3.6.2 F-statistic ﾿ 32

3.6.3 R-squared ﾿ 32

3.6.4 Durbin-Watson statistic ﾿ 33

CHAPTER FOUR

DATA PRESENTATION, DATA ANALYSIS AND DISCUSSION OF FINDINGS

4.1 Data Presentation ﾿ 34

4.1.1 Debt Ratio ﾿ 35

4.1.2 Debt-Equity Ratio (DER) ﾿ 35

4.1.3 Long Term Borrowings (LTBR) ﾿ 36

4.2 Data Analysis ﾿ 37

4.3 Test of Hypotheses ﾿ 41

4.4 Discussion of Findings ﾿ 42

CHAPTER FIVE

SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

5.1 Summary of Findings ﾿ 44

5.2 Conclusion ﾿ 44

5.3 Recommendations ﾿ 45

REFERENCES

APPENDICES