Abstract:
The impact of debt structure on financial performance of banks in Ghana remains an
important research issue. According to Ghana Banking Survey (2010), the assets of the
banks have changed, competition has increased and return on equity has been falling.
The present study, therefore, attempts to empirically investigate the impact of debt
structure, which is an important component of capital structure, on the profitability of
banks listed on the Ghana Stock Exchange, covering the period 2000-2010, using a
relatively elongated panel dataset and a robust estimation technique. The study provides
an empirical conclusion that listed Ghanaian banks use 80.23% debt and 17.77% equity,
and hence the capital structure of Ghanaian banks is hugely skewed towards debt. However,
the debt structure of listed Ghanaian banks indicates more than 81% short-term debt
and less than 9% long-term debt. Thus, the impact of capital structure on financial
performance of Ghanaian listed banks is such that short-term debt positively influences
profitability and long-term debt negatively affects profitability.
