Capital Structure, Growth and Profitability: Evidence from Domestic Commercial Banks in Cambodia

Abstract

This paper aims to examine the impact of capital structure and growth on the profitability of domestic commercial banks in Cambodia. The study uses a panel least squares (PLS) method using a sample of 10 domestic commercial banks in Cambodia over the period of 2005-2013 to examine the relationship between capital structure, growth, and profitability of commercial banks. The finding reveals that capital structure variables including debt to equity (DE), equity to loan (EL), and equity to deposit (ED) have a significantly negative impact on return on assets (ROA) and return on equity (ROE) with 1% significance level. Moreover, the growth variables including growth in assets (GA) and growth in equity (GE) have shown a positive relationship with ROA and ROE. A significant relationship exists only between GE and ROE at 1% significance level.