Abstract:
This study examines the effect of capital structure (measures as short-term debt ratio,
long term debt ratio, and total debt ratio) on financial performance (measured by
Return on Assets and Return on equity) of listed banks in Ghana. The study
considered all the nine (9) listed banks in Ghana over a 11-year period (2010-2020)
while secondary data was extracted from the annual report of the banks A dynamic
panel approach of difference Generalized Method of Moments was used to analyze
the data of the study.
The regression analysis revealed short term debt ratio, long-term debt ratio and total
debt ratio all have statistically negatively relationship with Return of Equity
(profitability) of banks in Ghana. The result suggests that an increase in any of short term debt, long-term debt or total debt of their capital structure would lead to a
reduction of the profitability of banks in Ghana. On the macroeconomic variables the
study found inflation and exchange rate to have statistically positive and negative
relationship respectively; with financial performance of listed banks in Ghana.
The results call for management of banks to have an efficient and effective credit
policy that improves the performance level and credit policy should contain upper and
lower limits of taking credit or debt to reduce finance cost. As high finance cost
would adversely affect their financial performance, managers must always be alert on
the level of debt to equity so as not to affect profitability negatively.
Description:
A dissertation in the Department of Applied Finance and Policy Management,
School of Business, submitted to the School of
Graduate Studies in partial fulfillment
of the requirements for the award of the degree of
Master of Business Administration
(Finance)
in the University of Education, Winneba
