The Relationship Between Capital Sructure and Financial Performance of Firms in Ghana and Nigeria

Abstract

This study aimed to investigate, using a sectorial analysis, the relationship between capital structure and financial performance and consider the effect of debt maturity on the relationship. the relationship between capital structure and financial performance, considering the debt maturity, using 425 cross-sectional firm-year samples from firms in Ghana and Nigeria from 2014 to 2019. The empirical findings suggested a significant negative relationship between capital structure and financial performance. Debt maturity did not affect the relationship between capital structure and financial performance. However, the Industry influences the direction of the relationship between capital structure and financial performance. Also, debt maturity influences the capital structure performance relationship in specific sectors but not the market. This paper extends on previous studies on the relationship between capital structure and financial performance by incorporating sectorial and debt maturity on firms in Ghana and Nigeria. The findings of this study will assist finance managers in maximizing performance by considering financially sensible heterogeneities such as the sector and the funding source when making financing decisions.