Date of Conferral

2022

Degree

Ph.D.

School

Management

Advisor

Robert Haussmann

Abstract

AbstractThe decision to fund the operations of a company through debt or equity has implications for the long-term sustainability of the organization. The purpose of this quantitative causal-comparative study was to evaluate the impact of capital structure on the financial performance of U.S. retail banks and to observe the behavior of the banks during a time of crisis to determine whether capital structuring decisions could support the bank in surviving financial distress. The research questions focused on the effects of capital structure, including common stock equity with preferred stock compared to common stock equity with secured debt, on earnings, profitability, liquidity, and dividends per share to sustain banks in times of economic downturn. Modigliani and Miller’s model of financial management provided the framework for the study. Secondary data were collected from financial statements of 30 U.S. retail banks. Descriptive analysis, histogram analysis, regression analysis, and correlation analysis were conducted to test the hypotheses. The results indicated that capital structure had a significant impact on earnings, liquidity, profitability, and dividend per share of the banks. Banks had a greater reliance on debt funding, and this impacted their profits and liquidity. Moreover, large banks with a larger client base were able to perform better than small banks in terms of revenue, profits, and dividend payments to shareholders. The results may effect positive social change by indicating the appropriate choice of capital structure that would offer the best return for U.S. retail banks

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