Determinants of the Capital Structure of Ghanaian Firms

This study compares the capital structures of publicly quoted firms, large unquoted firms, and small and medium enterprises (SMEs) in Ghana. Using a panel regression model, the paper also examines the determinants of capital structure decisions among the three sample groups. The results show that quoted and large unquoted firms exhibit significantly higher debt ratios than do SMEs. The results did not show significant difference between the capital structures of publicly quoted firms and large unquoted firms. The results reveal that short-term debt constitutes a relatively high proportion of total debt of all the sample groups. The regression results indicate that age of the firm, size of the firm, asset structure, profitability, risk and managerial ownership are important in influencing the capital structure decisions of Ghanaian firms. For the SME sample, it was found that factors such as the gender of the entrepreneur, export status, industry, location of the firm and form of business are also important in explaining the capital structure choice. The study provides useful recommendations for policy direction and management of these firms.