Title: The effect of capital structure on firm performance: empirical evidence from emerging economy

Authors: Regina Naa Amua Dodoo; Matilda Kumi; Tinashe Mangudhla

Addresses: Department of Business Administration, Hohai University, Nanjing, Jiangsu Province, 211100, China ' Department of International Trade and Economics, Jiangsu University of Technology, Changzhou, 213001, China ' School of Management, University of Science and Technology of China, Hefei, Anhui, 230026, China

Abstract: The effect of capital structure on company performance was investigated for a decade (2008-2017) using a panel data sample representing 15 non-financial firms registered on the Ghana stock exchange. Because improved performance is required for the firm's long-term survival, the relationship between capital structure and firm performance cannot be neglected. The empirical studies using two Step System generalized method of moment (GMM) and ordinary least squares (OLSs) regression methods show that capital structure (especially STD and LTD) has a negative impact on company performance as assessed by return on asset (ROA). Capital structure (LTD and DE) has no substantial impact on firm performance as assessed by return on equity (ROE). These findings lead the study to the conclusion that capital structure has little to no impact on the financial performance of Ghana's listed non-financial companies. These results are supported with the robustness check.

Keywords: capital structure; firm performance; non-financial listed firms; Ghana stock exchange; GMM; generalised method of moment.

DOI: 10.1504/EMJM.2023.128241

EuroMed Journal of Management, 2023 Vol.5 No.1, pp.83 - 99

Received: 29 Jun 2022
Accepted: 08 Aug 2022
Published online: 12 Jan 2023 *