EXECUTIVE SUMMARY : The study has been undertaken to explore the impact of capital structure on profitability of five non-life insurance companies listed in NEPSE for a period of 10 years (FY 2066/67-FY 2075/76). More specifically, the study aims to analyze the impact of firm specific variables such as debt ratio, equity ratio and firm size and macroeconomic variables such as GDP, inflation and interest on ROE, which is taken as a proxy of profitability. The data of the study has been analyzed by using descriptive statistics, correlation, diagnostic tests, multiple panel regression models and time series analysis. The result of one-way Fixed Effect Model reveals that equity ratio is the most significant predictor of ROE in context of non-life insurance companies. The significant positive relationship between ER and ROE implies that as ER increases, ROE of these firms increases and vice versa. This finding suggests that the optimal capital structure to enhance profitability of non-life insurance firms should consist of a higher level of equity rather than debt. The study has also conducted cointegration test to analyze the long-run equilibrium of macroeconomic variables with ROE. It is found that GDP, inflation and interest have no long term relationship with ROE. Hence it can be concluded that ROE of the firms are impacted more by the firm specific variables such as equity ratio whereas, the macroeconomic variables are of little significance to ROE.   
ACKNOWLEDGEMENT 
I would like to express my sincere gratitude towards Kathmandu University  School of Management for incorporating business research as a requirement for completing Masters degree as this would give the students an opportunity to identify real world opportunities and problems and initiate appropriate solution for them as well as enhance their analytical and research skills. I would like to acknowledge Prof. Dipendra Karki, my research supervisor for  his constant guidance, constructive ideas, encouragement and valuable time. It is because of my supervisor that I got the opportunity to learn various econometric models and apply them for the purpose of this research. Lastly, I would also like to take this opportunity to thank all my friends and family for their continuous encouragement to help me complete this research report successfully. 
 
Shreejana Prajapati 
Registration Number: 015782-13 
MBA Fall 2017