Capital Structure Influence on Firm’s Financial Performance: Differences in Commercial Public and Private Banks, Evidence from Tanzania

This study investigates the influence of capital structure on private and public firm’s financial performance measured by ROA and ROE in Tanzania. The period of 2000-2022 was chosen for the study as both databases have the capacity to store data up to 22 years and beyond. The study survey was undertaken from 21 private commercial banks and 13 public commercial banks, which are listed at the Dar es Salaam Stock Exchange (DSE), which reached 426 and 286 years of observations, respectively. Capital structure is measured by total debt, long-term debt and short-term debt.  Then, the study checks if there is a difference between these relationships. Fixed effect regression was used to investigate the relationship between the independent and dependent variables. Capital structure was found to influence performance positively, except for short-term debts influence on ROA in the case of publicly listed commercial banks and long-term debts influence on ROA in the case of private commercial banks.   There was no statistically significant difference found of the influence of the capital structure on performance between public and private commercial banks, except for the influence of the long-term debt.