The Effect Of Financial Performance On The Debt Structure Of Manufacturing Firms

The purpose of this paper is to investigate the effect of financial performance on the debt structure of Manufacturing firms listed on the Ghana Stock Exchange from the perspectives of dominant capital structure theories namely,M&M theory,the tradeoff,and pecking order theory,which assume to be contrasting each other.A panel econometric technique namely the fixed effects model is employed based on the result of the Hausman test to estimate the impact.an indicator of debt structure which is Total debt(TDR)was measured by the total leverage proportion to total assets.Proxies namely profitability,liquidity,firm size,tangibility,and asset turnover.The main control variables used in the current study are business risk,growth rate,dividend,non-debt tax shield,and corporate Tax.All tests in this study are applied on data obtained from annual financial reports of the 8 most active companies on the Ghana stock Exchange during the period 2007 to 2020.The statistical results show that(1)there is a significant adverse effect of profitability and debt structure,(2)positive relationship between liquidity and debt structure.Finally,(3)positive correlation between asset turnover and debt structure.On the contrary,there was an insignificant effect of tangibility and firm size debt structure.