Capital structure and firm performance the moderating role of corporate governance of firms in Ghana

Abstract

Capital structure has been proffered to influence the performance of companies whilst the corporate governance measures ensured by companies can also influence the performance of companies. This study sought to investigate the relationship between capital structure and financial performance of companies, to find the relationship between corporate governance and financial performance of companies and to examine whether corporate governance moderate the capital structure-performance relationship. The study used causal research design and quantitative research approach. Population for the study was 38 listed companies on the GSE, purposive sampling technique was used to select 11 companies. Multivariate regression method through ordinary Least square estimation was employed. The result showed that capital structure has positive relationship with financial performance. On the other hand, corporate governance mechanisms such as BS, BC, BGD has positive effect on financial performance. Further, the study observed that corporate governance significantly moderates the capital structure-financial performance nexus and in a negative direction except BCTDTA which moderated the relationship in a positive direction. The study recommends industrial players to ensure appropriate corporate governance measures, ensure right combination of equity and debt in their capital mix since its influences financial performance.