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VOL. 11, ISSUE 1 (2025)
Effect of debt financing on profitability of selected commercial banks in Nepal
Authors
Suju Chaudhary
Abstract
This study analyzes the effect of debt
financing on profitability of selected Nepalese commercial banks, focusing on
key debt-related ratios and their relationship with Return on Assets (ROA) and
Return on Equity (ROE). This study employs both descriptive and causal research
designs, utilizing secondary data from 10 commercial banks in Nepal SPSS
20 and Microsoft Office Excel 2003. The findings indicate that ratios like Debt
to Equity Ratio (DER ) and Interest
Coverage Ratio (ICR) significantly influence profitability, with ICR showing a
positive correlation and DER a
negative correlation with both ROA and ROE. Regression analysis reveals that
ICR and DER are key predictors of
ROA and ROE, with ICR having a positive effect and DER
a negative one. Short-term debt also appears to have a positive influence on
profitability, while long-term debt ratios show weak or no significant
correlation. The study highlights the importance of efficient debt management,
particularly in balancing short-term and long-term liabilities, to enhance the
financial performance of Nepalese banks.
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Pages:1-9
How to cite this article:
Suju Chaudhary "Effect of debt financing on profitability of selected commercial banks in Nepal". International Journal of Commerce and Management Research, Vol 11, Issue 1, 2025, Pages 1-9
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