The Effect of Capital Structure on the Performance of Palestinian Financial Institutions

Abstract

This study aims at finding the relationship between the market efficiency and capital structure of Palestinian financial institutions. The study establishes a model to measure the effect of capital structure on the bank efficiency measured by ROE, ROA, Total deposit to assets ,total loans to assets and total loans to deposits were used to measure capital structure. It is found that leverage has a negative effect on bank profits, an increase in each ROA and Total Deposit to Assets increase bank efficiency. We also tested the effect of the above variables on bank market value measured by Tobin's Q. It was also found that Leverage has a negative effect on market value of the bank, a positive and strong relationship between market value and ROA and bank deposits to total deposits.