THE IMPACTS OF CAPITAL STRUCTURE ON BANKING PROFITABILITY: A CASE STUDY OF UAE ISLAMIC BANKS

Abstract

This study aims to analyze the correlation and impact of capital structure on the performance of six Islamic banks in the United Arab Emirates—Abu Dhabi Islamic Bank, Dubai Islamic Bank, Al Hilal Bank, Sharjah Islamic Bank, Emirates Islamic Bank, and Ajman Bank—over the period 2019–2024. Two capital structure indicators (total liabilities to total assets and total liabilities to equity) and two profitability indicators (return on total assets and return on equity) were examined. The findings reveal an inverse correlation both between the capital structure indicators and between the profitability indicators. Furthermore, total liabilities to total assets have a direct positive influence on profitability, whereas total liabilities to equity shows an inverse impact. These results provide valuable insights into the role of capital structure in banking performance within the UAE Islamic banking sector.