Does Capital Structure Affects Firms’ Performance in Ghana? Panel Data Analysis

13 Pages Posted: 23 Oct 2019

See all articles by John MacCarthy

John MacCarthy

University of Professional Studies, Accra

Helena Ahulu

University of Professional Studies

Date Written: October 14, 2019

Abstract

This paper examines the effect of capital structure on the firms’ performance. The study collected data from seventeen firms listed on the Ghana Stock Exchange from 2009 to 2018. A quantitative research technique is used to collect data to test two hypotheses. Panel data regression is employed to determine the effect of capital structure on firms’ performance. The study revealed that short-term debt and total debt accounted for 67% and 76.3% respectively of capital used to finance the operations for the period. Furthermore, the study revealed that there is significant and negative relationship between capital structures and firms’ performance. The study concludes that firms should minimise the use of debt capital and rather concentrate on equity capital to finance their operations. The study recommends that firms should increase sales and invest in tangible assets to maximise the firms’ performance.

Keywords: capital structure, firms, profitability, short-term debt, total debt

JEL Classification: G32

Suggested Citation

MacCarthy, John and Ahulu, Helena, Does Capital Structure Affects Firms’ Performance in Ghana? Panel Data Analysis (October 14, 2019). Available at SSRN: https://ssrn.com/abstract=3469545 or http://dx.doi.org/10.2139/ssrn.3469545

John MacCarthy (Contact Author)

University of Professional Studies, Accra ( email )

Accra, 6302 Zug
Ghana

Helena Ahulu

University of Professional Studies

P.O.Box LG149
Legon
Accra
Ghana

Register to save articles to
your library

Register

Paper statistics

Downloads
9
Abstract Views
74
PlumX Metrics