Title: Capital structure and firm value nexus: the Ghanaian experience

Authors: Ebenezer Fiifi Emire Atta Mills; Jema Jason Mwasambili

Addresses: School of Economics and Management, Jiangxi University of Science and Technology, Ganzhou, 341000, China; Ganzhou Academy of Financial Research (GAFR), Ganzhou, 341000, China ' School of Economics and Management, Jiangxi University of Science and Technology, Ganzhou, 341000, China

Abstract: This study examines the causal relationship between capital structure and firm value. It examines causality between variables using yearly series data from 2010 to 2017 using the financial statement of 38 companies listed on the Ghana Stock Exchange. Panel unit root tests, cointegration methods, panel FMOLS, DOLS, and Granger causality tests were applied. This study provides managers with awareness of the cost that the company would incur by ignoring the power of capital structure selection. This study found that there is short-run bidirectional panel causality running between equity, long-term debt, short-term debt, and growth to firm value. For long-run causal relationships, the results indicate that estimated coefficients of lagged error correction term in variable equations are statistically significant, implying that these variables could play an important role in regulating processes. The findings of this study are important for decision-makers to optimise the capital structure to increase the firm's value.

Keywords: capital structure; firm value; Ghana Stock Exchange; leverage; panel data.

DOI: 10.1504/IJADS.2022.120295

International Journal of Applied Decision Sciences, 2022 Vol.15 No.1, pp.46 - 67

Received: 31 May 2020
Accepted: 10 Aug 2020
Published online: 13 Jan 2022 *

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