The impact of working capital and financial structure on profitability of Islamic banking industry


Mohammad Khodaei Valahzaghard and Ali Taherinejhad


In this paper, we present an empirical survey on selected Iranian banks operating actively from 2005 to 2010. The proposed study considers the impacts of four important factors including degree of financial leverage, bank size, working capital and liquidity on return on asset as a primary source of measuring profitability of Iranian banking system. The survey uses Pearson correlation test along with simple and multi regression analysis to study the behavior of these four factors on profitability of banking system. Based on the results of this survey, a high level of working capital and financial leverage will result to lower profitability in Iranian private banks.


DOI: j.msl.2012.06.045

Keywords: Return of assets ,Profitability ,Financial structure ,Financial leverage

How to cite this paper:

Valahzaghard, M & Taherinejhad, A. (2012). The impact of working capital and financial structure on profitability of Islamic banking industry.Management Science Letters, 2(7), 2625-2630.


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