Abstract: The study examined the impact of capital structure on the performance of listed manufacturing firms in Ghana. The study made use of the annual reports of the twelve (12) listed manufacturing companies from 2010 to 2016 financial years. The leverage of the firms was used as a measure of capital structure whilst both return on capital employed (ROCE) and return on equity (ROE) were used as proxies for performance. Ordinary Least Square (OLS) regression model was used to estimate the impact of capital structure (leverage) on the performance of the firms. The study found empirical evidence to support that the capital structure (leverage) had a significant negative impact on both return on capital employed and return on equity of the listed manufacturing firms in Ghana. Additionally, the study provides evidence that the control variables - firm age and industry of the firms - have a significant positive impact on both ROCE and ROE. However, the impact of firm size on ROCE was not significant. Overall, the evidence obtained supports the conclusion that capital structure (leverage) has a negative and significant impact on performance of the Ghanaian listed manufacturing firms. The study, thus, recommends that the management of manufacturing firms consider a reduction in their debt level in order to increase their performance.
Keywords: Capital Structure, Leverage, Capital Irrelevance, Agency Cost, Return on Capital Employed, Return on Equity, Ghana.
Title: The Impact of Capital Structure on Corporate Performance: An Empirical Study of Ghanaian Listed Manufacturing Companies
Author: Alfred Bassaw Morrison
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
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