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PROJECT TOPIC: EFFECT OF FINANCIAL LEVERAGE ON COMMERCIAL BANKS’ PROFITABILITY IN NIGERIA

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CHAPTER ONE

1.0 INTRODUCTION

1.1 STATEMENT OF THE PROBLEM In regarding with the findings of researchers on financing decision made by In regarding with the findings of researchers on financing decision made by financial managers in financing investment opportunities, no single best way to follow on what type of financing that when pursued results in increase of profitability of the firms. Researchers like Zeituni and Tain (2007), Majumdar and Chhibber (1997), Ghosh (2007), Weill (2008) and Arbiyan and Safari (2009) argue that financial leverage has negative impact on profitability of firms while Abor (2005) and Holz (2002) argue that financial leverage has positive impact of firm’s profitability and still others researchers argue that leverage has no effects on firm’s profitability. Myers (2003:830) supports two views mathematically that financial leverage can either increase or reduce the Return on Equity. One may want to know, where do the commercial banks in Nigeria stand? So this research is aiming to investigate the effect of financial leverage and profitability of commercial banks in Nigeria so as to promote profitability through designing the right financing decisions to adopt. financial managers in financing investment opportunities, no single best way to follow on what type of financing that when pursued results in increase of profitability of the firms. Researchers like Zeituni and Tain (2007), Majumdar and Chhibber (1997), Ghosh (2007), Weill (2008) and Arbiyan and Safari (2009) argue that financial leverage has negative impact on profitability of firms while Abor (2005) and Holz (2002) argue that financial leverage has positive impact of firm’s profitability and still others researchers argue that leverage has no effects on firm’s profitability. Myers (2003:830) supports two views mathematically that financial leverage can either increase or reduce the Return on Equity. One may want to know, where do the commercial banks in Nigeria stand? So this research is aiming to investigate the effect of financial leverage and profitability of commercial banks in Nigeria so as to promote profitability through designing the right financing decisions to adopt.


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