Thesis (MSc) - Cyprus International Relations. Institute of Graduate Studies and Research Accounting and Finance Department

Includes bibliography (sheets 43-48)

ABSTRACT According to this research, the impact of capital structure on the financial performance of commercial banks in Sierra Leone and Kenya was examined. The assessment of the optimal capital mix for increasing the profitability of a firm is a hotly debated topic in financial research. It will be done by observing the impact of various financial parameters such as short-term debt to asset ratios, long-term debt to asset ratios, interbank borrowings, and equity on corporate financial performance. It was decided to use a descriptive study approach to analyse the association between the variables. The intended population consisted of all 35 commercial banks in Sierra Leone and Kenya, as well as their customers. Over a ten-year period (2011-2020), a panelized multiple regression data model was utilized using the generalized moments methods (GMM) to examine all the data from 25 commercial banks collected during the study. Since it covered a wide range of phases in the banking sectors of Sierra Leone and Kenya, the study period was relevant. The conclusions of the study will be useful to everyone involved in the formulation of bank policy. According to the findings of the study, interbank borrowing and equity have a considerable advantageous impact on company's profitability. Profitability is neither affected by the short-term debt-to-asset ratio, nor is it affected by the long-term debt-to-asset ratio, on the other hand. The recommendations that follow are also provided. Firstly, the study recommends that bank managers concentrate on establishing a successful debt level that aims to satisfy legal requirements while concentrating on other variables that may be relevant in defining profitability. Second, the research advises bank executives to concentrate their efforts on increasing their banks' capital strengths through rights issues, share bonus issues, or strong profit retention policies. Finally, bank management should establish excellent working relationships with other financial institutions to obtain lending from them when the need arises. Keywords: Capital Structure, Commercial Banks, Financial Performance, Inter-bank Borrowing, Kenya, Long-term Debt, Profitability, Return on Asset, Return on Equity, Short-term Debt, Sierra Leone.