This paper investigates the impact of capital structure on
the financial performance of commercial banks in Ghana for the period,
2008-2022. The methodology involves a robust analytical framework using
econometric models, particularly the Panel Autoregressive Distributed Lag
(P-ARDL) regression model enabling a thorough examination of the complex
interactions between capital structure and bank performance. Spanning five
listed banks over a 15-year period for which consistent data is available,
panel-data econometric modelling was used to accommodate individual
heterogeneity. The findings reveal a significant long-run positive impact of
capital structure on financial performance, suggesting that optimal capital
structure can enhance bank performance in the long run. In the short run,
capital structure contemporaneously and sluggishly impacts ROA negatively, but
with only a weak negative sluggish effect on ROE. The results further highlight
the significant long-run detrimental effect of bank size and the robust
positive long-run effect of bank growth on the financial performance of banks.
The paper recommends a strategic focus on optimising capital structure to
enhance the long-run financial performance of Ghanaian commercial banks thereby
underscoring the importance of considering internal factors in capital
structure decisions. This study contributes to the global discourse on capital
structure, offering fresh perspectives from an underdeveloped economic context.
Author(s) Details
Deodat E. Adenutsi
Department of Accounting and Finance, HTU Business School, Ho Technical
University, Ho, Ghana.
Please see the link:- https://doi.org/10.9734/bpi/bmerp/v1/880
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