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THE EFFECT OF CAPITAL STRUCTURE ON PERFORMANCE OF BANKS IN GHANA KWAME NKRUMAH UNIVERSITY OF SCIENCE AND TECHNOLOGY, KUMASI.

SCHOOL OF BUSINESS

By ANAMAN MARGARET DANSOA

A Thesis Submitted to the School of Business, Kwame Nkrumah University of Science and Technology in Partial Fulfillment of the Requirements for the Degree Of

MASTER OF BUSINESS ADMINISTRATION

June, 2011

ABSTRACT
This study aims to find the impact of the capital structure on performance of banks in Ghana. Existing literatures conclude that, capital structure of a firm has impact on the performance of the firm. The study uses ROE as performance indicator; the researcher employs the uses of correlation analysis by using the Pearson correlation coefficient to find the multicollinearity among the variables used. Regression analysis was use to find the impact or the contribution of each of the variables used. It was found that banks in Ghana uses leverage in its financing and was noted that, banks in Ghana operates above its minimum requirements stated by the bank. It became evidently known through the analysis that, short term debt contributes higher to the performance of banks. the higher the short term debt of the bank, the higher its performance. However long term debt financing was also recorded to have a positive impact on the profitability of the bank even though it is minimal. Moreover, the findings show that, assets held by banks increase its profitability if managed efficiently. The research is aimed to be added to the existing literature on the capital structure and performance.

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DECLARATION
I hereby declare that this submission is my own work towards the award of master of Business Administration and that to the best of my knowledge it contains no material previously published by another person nor material which has been accepted for the award of any other degree of the University except where due acknowledgement has been made in the text.

ANAMAN MARGARET DANSOA

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MR, NEWLOVE G. ASAMOAH (Supervisor)

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------------------------------Head of Department

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DEDICATION

This project is dedicated to my parents, siblings and friends for their love and care throughout this course.

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ACKNOWLEDGEMENT

I express my profound gratitude to the Almighty God for seeing me through this course. I would also like express special appreciation to my supervisor, Mr. Newlove G. Asamoah for his penetrating criticism, guidance, and unceasing assistance in every aspect of my work. Recognition is given to all the academic facilitators who taught me during the two years masters program. I also thank Price water house coopers for their help in gathering my data for this project.

Table of Contents

ABSTRACT...ii DECLARATION ....................................................................................................................... iii DEDICATION ........................................................................................................................... iv ACKNOWLEDGEMENT .......................................................................................................... v Table of Contents ....................................................................................................................... vi LIST OF TABLES ..................................................................................................................... ix

CHAPTER ONE INTRODUCTION....................................................................................... 1 1.2 Problem Statement ................................................................................................................ 3 1.3 Objectives of the Study ......................................................................................................... 4 1.4. Research Questions .............................................................................................................. 5 1.5 Justification of the Study ....................................................................................................... 5 1.6 Scope of the study ................................................................................................................. 6 1.7 Overview of the Research Methodology............................................................................... 7 1.8 Organisation of the Study...................................................................................................... 7 1.9 Limitations of the Study ........................................................................................................ 8

CHAPTER TWO LITERATURE REVIEW ......................................................................... 9 Introduction ................................................................................................................................. 9 2.1 Performance Theory .............................................................................................................. 9 2.2 Capital structure theory ....................................................................................................... 11 2.2.1 Static Trade-Off Theory ................................................................................................... 11 2.2.2 Agency Cost Theory......................................................................................................... 14 2.2.3 Information Asymmetry Theory ...................................................................................... 15 2.2.4 Capital Structure Life Stage Theory and Performance .................................................... 16 2.2.5 Pecking Order Theory ...................................................................................................... 17 2.3 Strategic Management Research and Capital Structure ...................................................... 18 2.4 Overview of the banking industry in Ghana ....................................................................... 21
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2.4.1 Recent Developments, Structure and Regulation ............................................................ 24

CHAPTER THREE METHODOLOGY .............................................................................. 26 Introduction ............................................................................................................................... 26 3.1 The Research Paradigm. ...................................................................................................... 26 3.2 The Research Method.......................................................................................................... 27 3.2.1 The Study Population ....................................................................................................... 27 3.2.2 Sampling Techniques ....................................................................................................... 27 3.2.3 Sample Size ...................................................................................................................... 27 3.2.4 Data Source and Collection Method ................................................................................ 28 3.3 Data Analysis ...................................................................................................................... 28 3.4 Proposed Model Used for the Study ................................................................................... 29 3.4.1 The proposed model is outlined below ............................................................................ 29 3.4.2 Research Variables ........................................................................................................... 30 3.4.3 Variables Rationalization ................................................................................................. 31 3.4.4 Predictor or Explanatory Variables .................................................................................. 31 3.4.5 Control Variables ............................................................................................................. 32 3.5 Hausman Specification Test ................................................................................................ 34 3.6 Pearson Correlation Coefficients ........................................................................................ 35

CHAPTER FOUR DATA PRESENTATION, ANALYSIS AND DICUSSIONS ............. 36 Introduction ............................................................................................................................... 36 4.1 Descriptive Statistics ........................................................................................................... 36 4.2 Pearson Correlation Analysis .............................................................................................. 38 4.3 Regression Results from Stata 10 Output ........................................................................... 41 4.3.1 Discussions from Model One on Bank Performance, Bank Capital and the Control Variables.................................................................................................................................... 43 4.3.2 Discussions on Model Two on Bank Performance, Short term Debt and Control Variables.................................................................................................................................... 47 4.3.3 Discussions of Mode Three on Bank Performance, Long-term Debt and the Control Variables.................................................................................................................................... 50

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4.3.3 Discussions of Model Four on Bank Performance, Total Debt and the Control Variables ................................................................................................................................................... 53

CHAPTER FIVE FINDINGS, CONCLUSIONS AND RECOMMENDATIONS ........... 54 Introduction ............................................................................................................................... 54 5.1 Findings ............................................................................................................................... 54 5.1.1 Key findings ..................................................................................................................... 54 5.2 Conclusions ......................................................................................................................... 56 5.3 Recommendations ............................................................................................................... 56 References ................................................................................................................................. 58

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LIST OF TABLES Table 4.1 Descriptive Statistics of Variables 38 Table 4.2: Pearson Correlation Coefficients .39 Table 4.3A: Regression Result for Model One, with Total Assets ..41 Table 4.3B: Regression Result for Model One, with Loans and Investments .42 Table 4.4A: Regression Result for Model Two, with Total Assets .45 Table 4.4B: Regression Result for Model Two, with Loans and Investments 46 Table 4.5A: Regression Result for Model Three, with Total Assets ..48 Table 4.5B: Regression Result for Model One, with Loans and Investments 49 Table 4.6A: Regression Result for Model Four, with Total Assets 51 Table 4.6B: Regression Result for Model Four, with Loans and Investments ..52

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CHAPTER ONE INTRODUCTION 1.1 Background Study A firms performance is very important for different groups of people. All agents that have made financial decisions about companies were concerned with its financial position and its performance. Thus, owners, managers, potential investors, banks, other financial institutions, creditors, business partners, employees, and government had been interested in the capital structure of the company in order to analyse and predict its performance. Much of the groundbreaking work in the field of corporate finance focused on why firms chose differing proportions of debt and equity to finance their operations. Perhaps the most famous work in this field was the arbitrage argument of Modigliani and Miller (1958) which spawned a flood of research in the area of capital structure. Most capital structure researches have been concentrated on the search for an optimal capital structure. Three main theories have been subsequently advanced: Pecking Order (POH), Agency Cost (ATF) and Static Trade-off (tax based). Pecking order theory ( information asymmetry theory) states that firms prefer to finance new investment, first from internally with retained earnings , then with debt , and finally with an issue of new equity (Myers,1984). The agency cost of capital structure states that an optimal capital structure will be determined by minimizing the cost arising from conflict between the parties involved. Even in the absence of agency problems the presence of asymmetric information may cause firms to under invest which in itself is a source of inefficiency (Myers and Majluf 1984). The existence of asymmetric information is the root cause of these inefficiencies (Brooks and Davidson, 2003).

Five major sub-theories within capital structure theory which attempt to explain why capital structure matters and how it contributed to the overall value of the firm have emerged, however, none of the researches had proved conclusive (Myers, 2001). One of the five sub-theories proposed that capital structure may be influenced by the organisational life stage of a firm, as financing needs change with the changing circumstances of the firm (Damodaran, 2001; Bender & Ward, 1993). However, capital structure theory and performance theory are generally approached in isolation. Capital structure research has typically been carried out by researchers with a background in corporate finance or economics, while performance has evolved out of research in the field of strategic management. While the link between capital structure and performance has been suggested by researchers on the periphery of both fields, it appears never to have been directly tested.

Lizal (2002) states three reasons of firms failure: wrong asset and capital structure, wrong financial structure, corporate governance problems. According to the neoclassical approach liquidation is an instrument for reallocation of resources from inefficient to efficient use. By going liquidation a firm frees the wrongly allocated resources for their more efficient use within the same or even another industry. These come as a result of low performances of the firms. Another reason for firms liquidation may be wrong financial structure, even if the asset structure is appropriate. This means that firm goes bankrupt in the short run, even though it would survive in the long run the quality of the capital markets is important in this case as they could provide some support for temporarily financially constrained firms. There is also a corporate governance problem, which often leads to liquidation, but changing the management of the firm would be a better solution in such case. Creditors (banks, different financial

institutions, business partners, suppliers) are interested in predicting performance of the company as a means of risk management. They should be able to evaluate the credit quality of the company in order to adjust the contracts and create the appropriate reserves.

1.2 Problem Statement


The argument pertaining to the relationship of firms performance and capital structure has been a subject of discussion of late among professionals in the financial markets since the work of Miller (1958). Locally, various research have been made towards the finding of the optimal capital structure and its determinants (Amidu, 2007, Boateng 2004 and Abor and Biekpe, 2004), role of debt in Balance sheets (Aboagye, 1996), capital structure and firms performance (Abor, 2005 and Kyereboa-Coleman, 2007) of which these also capitalized on the optimal capital structure. Of all these researchers only Kyereboa (2007) took into consideration the performance of banks, yet this study takes a different look from that of Kyereboa-Coleman. Kyereboah-Coleman (2007) sought to investigate the impact of capital structure on the performance of microfinance institutions in Ghana and Amidu (2007) who was interested in the determinants of capital structure of Banks in Ghana. Abor (2005) whose work actually

investigated the relationship between capital structure and profitability of listed firms on the Ghana Stock Exchange (GSE) and;. The difference that this study sought to brings is on the basis of the objectives as Kyereboah-Coleman (2007), limited the study to only micro-finance institutions in Ghana and therefore did not include banks whereas this study looks at banks only, moreover, Abor (2005), study was too broad to be applicable to the unique

characteristics of banks and also did not include unlisted banks. However, Amidu (2007) did not look at the relationship between capital structure and bank performance but rather the determinants of bank capital structure Issues such as corporate governance, agency cost, and capital structure also play important role because of the crucial roles played by banks in providing credit to non-financial firms, in transmitting the effects of monetary policy, and in providing stability to the economy as a whole ( Pratomo and Ismail, 2006). These have placed strong emphasis on the need to study the relationship between capital structure and bank performance. The researchers attention, however, shall be concentrated on differences across banks and not between banks and other firms, since banks in the proposed sample are subject to essentially equal regulatory capital and other constraints.

1.3 Objectives of the Study


This general objective of the study is to find the correlation between capital structure and performance of banks in Ghana, with the specific objectives being: 1. To find the leverage of Banks in Ghana, and to know whether they use more short term debt as long term debt financing. 2. To know whether the banks operate above or below the required minimum capital adequacy ratio 3. To examine the nature of capital structure of Banks in Ghana; 4. To examine the effect of debt financing on the performance of banks in Ghana 5. To find the effect of the total value of the bank assets to profitability 6. The association between the banks risk and performance
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Hypothesis Ho: Profitability of banks has no relationship with its capital structure. Ha: Profitability of banks has a relationship with its capital structure .

1.4. Research Questions


This study sought to answer the following questions to achieve the goal and objectives of the study. 1. What is the leverage mainly used by Banks in Ghana, and does the banks use short term debt as long term debt financing? 2. Does banks in Ghana operate below or above the required minimum capital adequacy ratio set by the central bank? 3. What is the nature of capital structure of banks in Ghana? 4. What effects does debt financing have on performance of banks in Ghana? 5. What effect does the total value of the bank assets have on profitability? 6. Is there an association between the banks risk and performance?

1.5 Justification of the Study


This research provide in depth information about the behavior of capital structure and

performance of a firm as it exists today on some selected banks in the banking industry in Ghana. As a result of the discoveries of crude oil in Ghana, it is becoming imperative that, the sector needs huge financial inflows to invest in these areas, however, the participation of a financial

companies depend on the capital structure and agency cost associated with the firms and its influences on the performance of the firm. Internal funds plays a major role in financing the sector, nevertheless, most investors assess the performance and the capital structure of the bank in order to assigned a contract to it due to the fact that these areas needs a huge financial capital In addition to the above, these banks as a result of increasing their financial base to place itself in a strategic level in order to attract foreign and local investors, capital structure and performance have become the tool use to assess these banks as it serves as the bench mark one will used to asses the bank to draw conclusion whether the bank has a strong capital base to support such huge investment or not.. Thus, assessment can be based on the firms debt financing method and its eventual effects on the performance, capital structure plays a major role for most investors and the general banking industry to asses its performance and to know if these have a relationship. Capital structure and performance of a firm will play an important role to determine the healthy of a firm that will help investors and financial educators to know the trend and stand of a particular firm in order to attract investors. This will have an impact on the local economy if local banks will have the needed capital to invest in this major sector of the economy of which banks capital structure and its performance will be the sole indicator to choose which entity and medium will be appropriate for financing.

1.6 Scope of the study


The study was conducted within the framework of the effect of capital structure on performance of banks in Ghana. The study was carried out on selected banks who have been in operation as at 2004 and having annual report from 2004-2010, within the commercial banking license of the
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central bank for operation. This study is not a case study approach of one particular bank; however, it covers all other players in the banking industry to reflect in the entire industry response to the effect of capital structure on their performance. Hence the result would be generalized and placed in the relevant context of the performance of banks in Ghana.

1.7 Summary of Methodology


The study concentrates on the performance of some selected banks in Ghana by considering their capital The research looks at the activities of the selected banks performances over the past five years because it is listed on the Ghanaian stock exchange, privately owned and some have operated for over eight years, which makes it unique. Secondary data were gathered from the banks website as well as the Price Water-coopers to aid as a check up of figures and to ensure the validity of these data, since the data are numeric in value, quantitative techniques were applied. Descriptive statistics were employed to make inferences and scientific judgment on data. Statistical analysis such as the correlation matrix and the multi variable regression models were applied to obtained the needed results as being extensively explained in chapter three.

1.8 Organisation of the Study


The study has five chapters. Chapter one deals with the introduction of the study area. Which comprises the background of the study, problem statement, significance. Goal and objectives, research questions methodology, limitations and organization of the study.

Chapter two captures the review of relevant literature to the study. The third chapter of the study presents detailed methodology that was used in this study. Chapter four contains data presentation, analysis and discussion whilst the final chapter concludes the summary of major findings, recommendations and conclusion.

1.9 Limitations of the Study


The researcher was constrained by time and financial resources and could not therefore apply other methods of data collection aside the information on the internet and from the banks. Most of the staff and senior managers these companies were always busy attending to customers which make it very difficult to solicit information from them. Some of these information were sourced from branch offices in Kumasi and their head office in Accra as well as the firms websites this brought additional cost to the researcher as the researcher travelled up and down to Accra for information.

CHAPTER TWO LITERATURE REVIEW Introduction


There has been a great deal of research into both organizational performance and capital structure theory, but relatively little into how the two theories may relate to one another. In order to lay a theoretical framework for our study, we review performance theory and capital structure theory literature independently. We also explore how and why existing research suggests that there might be a link between the two ideas.

2.1 Performance Theory


The pioneer modern theory of capital structure of a company and its relation to performance began with the paper of Modigliani and Miller (1958). They prove that the choice of between debt and equity financing in order to increase performance had no material effects on the value of firm or on the cost of availability. Since, then, various studies have been directed to explore the optimal capital structure in the absence of Modigliani-Millers assumption. Jensen and Meckling (1976), for example, argue that an optimal capital structure can be obtained by trading off the agency cost of debt against the benefit of debt to raise performance. The implication of this argument is that firms, which have fewer opportunities for asset substitution such as banks and mature firms, will have higher debt levels and eventually will affects its performances, ceteris paribus. Moreover, firms which have plenty of cash inflows but have a slow growth should have more debt. Large cash inflows without investment prospects create the resources to consume perquisites, build empires, overpay subordinates, etc. Increasing debt reduces amount
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of cash flows and increases manager fractional ownership of the residual claim. Jensen (1989) predicts that the firms that have optimal capital structure should be characterized by high leverage to aid it to perform creditably. Previous study by Myers (1977) finds that higher leverage can mitigate conflict between shareholders and manager concerning the choice of investment and the eventual performance of the company. For firms that need to finance a new investment, Myers (1984) recommends using a low risk debt than increasing equity. The reason is that if there is an asymmetric information where investor is less well-informed than current firm insiders about the value of firms assets, then it leads to a mis-priced of equity in the market. Investors do not believe on the new profitable project and make the security is so severely undervalued. Berger (2002) supports Myers argument. He argues that increasing the leverage ratio should result in lower agency costs of outside equity and improve firm performance, all else held constant. He suggests that under the efficiency risk hypothesis, more efficient firms choose lower equity ratio than other firms, because higher efficiency reduce the expected costs of liquidation and the financial distress. Higher profit efficiency may create a higher expected return for a certain capital structure and a corresponding higher performance, and this condition does not protect firms against future crises. Profit efficiency is strongly positively correlated with expected return and higher expected return is substituted for equity capital to manage risks. The empirical studies on those relationship have been conducted, among others are Titman and Wessel (1988), Mester (1993), Pi and Timme (1993), Gorton and Rosen (1995), Mehran (1995), McConnell and Servaes (1995) DeYoung, Spong and Sullivan (2001). Although these empirical literatures have been successful in the sense that many of the capital structure plus some control variables are correlated with firms performance.

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Banks in the sample are subject to essentially equal regulatory constraints, and we focus on differences across banks, not between banks and other firms. Most banks are well above the regulatory capital minimums, and our results are based primarily on differences at the margin, rather than the effects of regulation.

2.2 Capital structure theory


One of the most contentious issues in the theory of finance during the past quarter century has been the theory of capital structure (Bradley et al, 1984). Even Stewart Myers, one of the foremost researchers in the field, concluded, as recently as 2001, that there is no universal theory of the debt-equity choice, and no reason to expect one (Myers, 2001). While there may be a lack of consensus on exactly what drives the capital structure decision, there is no lack of alternative hypotheses. One of these theories, capital structure performance theory, is conspicuously underdeveloped. Although mentioned in text-books (Damodaran, 2001), mentioned obliquely in some research (Morgan & Abetti, 2004), and even referred to in the development of some of the other major theories (Myers, 2001), the idea that the capital structure of a firm may be related to its performance, appears to have received very little direct theoretical or empirical examination. We now briefly review the capital structure theories.

2.2.1 Static Trade-Off Theory


The debate about how and why firms choose their capital structure began in 1958 (Myers, 2001), when Modigliani and Miller (1958) published their famous arbitrage argument showing that the market value of any firm is independent of its capital structure. Based on Modigliani and
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Millers value invariance theory, we would not expect capital structure to vary from firm to firm, or over the performance of a single firm. But the theory was developed under a deliberately artificial set of conditions (Barclay et al, 1995) of no information costs, no personal or corporate taxes, no contracting or transaction costs, and a fixed investment policy. Unravelling Modigliani and Millers assumptions introduce us to the other major capital structure theories. The introduction of taxation effects implies that firms should, theoretically, seek to increase their debt levels in order to increase performance as far as possible (Miller, 1988). However other theorists (Stiglitz, 1974) added limitations to the optimal level of firm debt by arguing that liquidation costs increase as the firms level of debt increases, and this places an upper limit on the amount of debt that should be present in a firms capital structure. This evolved into the static trade-off theory, which proposes that firms attempt to achieve an optimal capital structure that maximises the value of the firm by balancing the tax benefits, with the liquidation costs, associated with increasing levels of debt (Myers, 1984). Some researchers have identified problem areas in the ability of static trade-off theory to explain actual firm behavior and its performance. Myers (2001) argued that static trade-off theory implies that highly performed profitable firms should have high debt ratios in order to shield their large profits from taxation, whereas in reality, highly profitable firms tend to have less debt than less profitable firms. Warner (1977) suggested that liquidation costs are much lower than the tax advantages of debt, implying much higher debt levels than predicted by the theory. There is, however, also some empirical evidence and theoretical support for the idea that firms at least in part construct their capital structure to take advantage of the interest tax shield (net of the interest tax burden to investors), while ensuring that they avoid incurring excessively high financial distress costs for the sake of performance. Kayhan and Titman (2004) found that, over the long term, firms do

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tend to move towards target debt ratios consistent with the theory to build a formidable capital structure and to improve performance. Static trade-off theory therefore offers one possible explanation of how firms choose their capital structure. It also provides some important support for capital structure theory and performance. Warner (1977) found that the ratio of the value of direct liquidation costs to the market value of the firm appears to fall as the value of the firm increases due to a higher performance, a view that has also found support from Esperenca (Esperenca et al, 2003). We might expect, therefore, to see liquidation costs reducing in importance as firms grow and develop, resulting in higher optimal debt ratios and higher levels of debt in larger, more mature firms and higher performance. Opler and Titmans (1994) study of indirect performances of banks using liquidation costs among retailers suggested that firms in the infancy, and adolescence life stages should have lower debt levels than firms in later life stages, as their liquidation costs are higher due to lower performances associated with them. It has also been argued that optimal firm leverage is related inversely to the variability of firm earnings (Bradley et al., 1984), which suggests that prime and stable firms, with more predictable earnings streams, should have higher debt ratios than younger, less predictable firms. Graham (2000) found that firms with unique products, low asset collateral or large future growth opportunities in other words, firms at early stages of development (infancy to adolescence) tend to have lower levels of debt than firms in the stable or aristocracy life stages. In summary, static trade-off theory suggests that firms in infancy, go-go and adolescence cannot afford debt as their liquidation costs are high, and their earnings are too low to use the tax benefit of increasing interest payments. In the prime and stable stages, the larger, more predictable

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earnings makes the tax shield advantage of debt more beneficial. Liquidation costs are also smaller in the prime and stable life stages. In the stages from aristocracy to death, firms are likely to experience a decrease in earnings (and hence a decrease in the tax shield benefit of debt) and as a result might be inclined to use less debt. Static trade-off theory thus suggests that the proportion of debt in a firms capital structure should follow a low-high-low pattern over the firms life stages to enhance performance over the various stages.

2.2.2 Agency Cost Theory


There is also another argument for how capital structure may be predisposed by symmetries between managers and investors. Not only do managers have diverse information about the prospects of the firm than shareholders do, but managers also have interests that diverge from those of shareholders. Agency costs are a good reason for firms to increase the amount of debt in their capital structure since it has a direct relationship with the performance of a company, as debt enables managers to bond their promise to pay out future cash flows (Jensen, 1986). According to agency cost theory, firms use more debt in their capital structure when investors seek to pressure management to use funds efficiently. Fosberg (2004) found that the debt ratio decreases as agency costs decrease because of an increasing proportion of ownership by management, and that those firms with fewer shareholders have more debt than firms with many shareholders. The link between fewer shareholders and more debt suggests that shareholders, who are able to influence capital structure in their favour, do so in a way that increases the level of debt.

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Jensen (1986) argued that agency costs are especially severe when the organisation generates substantial free cash flow, and that the control function of debt is most important in old, declining organisations that actually need to shrink. In the context of the Adizes life stage model this suggests that firms in the prime, stable, aristocracy, recrimination and bureaucracy life stages should take on more debt to control agency costs which will ultimately leads to higher performance. Jensen also argued that debt is less effective in reducing agency costs in rapidly growing organisations with large and highly profitable investment projects but no free cash flow . The firm with the lowest agency costs is, by definition, the one that is run by its owner (Ang et al, 2000) and therefore one would expect start-up firms (the infancy, go-go and adolescence life stages) that are run by the entrepreneur to have the least debt and higher performance. The agency cost argument therefore also offers support for capital structure theory. This time, however, the pattern of the relationship pattern is low-high-high. In terms of agency cost theory, we would expect young owner managed firms to have the least debt, and that debt levels will gradually increase as the firm develops and acquires a greater number of shareholders and more professional managers.

2.2.3 Information Asymmetry Theory


Stephen Ross developed the information asymmetry theory of capital structure by removing another assumption underlying Modigliani and Millers value invariance theory, namely that the market possesses full information about the its performance and funding activities of firms (Ross, 1977). If instead we assume that managers possess information about the firms future
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prospects that the market does not have, then managers choice of a capital structure may signal some of this information to the market (Ross, 1977). Increasing leverage, he reasoned, would signal to the market that the firms managers are confident about being able to pay interest in future, and hence are confident about future earnings prospects and performance. Increasing leverage would, therefore, increase the value of the firm by signalling to investors the size and stability of future cash flows (Ross, 1977). Fama and French (1988), on the other hand, countered by pointing to the fact that more profitable firms which are associated with higher performances tend to have lower levels of debt. They argued that increasing debt actually signals poor prospects for future earnings and cash flow as there will be less internal financing available to fund development. Therefore, while it has been argued that information asymmetries decrease over the lifetime of a firm (Baeyens & Manigaart, 2003), there is insufficient clarity on exactly how signalling, within the context of information asymmetries, affects capital structure decisions. We cannot, therefore, look directly to information asymmetries, and how they change over time, as an explanation of why capital structure might change over a firms periods of operation to increase performance.

2.2.4 Capital Structure Life Stage Theory and Performance


Some theorists have approached the problem of how organisational life stage relates to capital structure. Bender and Ward (1993) focused on the trade-off between business risk and financial risk, positing that business risk reduces and performance increases over the life stages of a firm, allowing financial risk to increase. (Opler et al, 2001) offered a similar view, stating that firms should use relatively more debt to finance assets in place and relatively more equity to finance growth opportunities, and should, therefore, use progressively more debt in their financing mix
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as they mature. This is supported by Damodaran (2001) who proposed that expanding and highgrowth firms would finance themselves primarily with equity, while mature firms would replace equity with debt. Capital structure life stage theory would seem to suggest, therefore, that debt ratios should increase as the firm progress and performance through the early life stages. From an empirical point of view, however, little work has been done to support or refute this idea. Most of the evidence for and against appears in the context of other arguments. In their analysis of the venture-capital financing of biotech ventures, for example, Morgan and Abetti (2004) argued that high technology ventures are so risky that they can only be financed by venture capital and private equity sources, a view that supports the theory that riskier firms in the infancy, adolescence and go-go life stages should use more equity. There has been little research focusing directly on capital structure life stage theory and its performance, but the little there is suggests, in line with static trade-off theory, that debt ratios should follow a low-high- low pattern over the firms life. Firms in infancy, go-go and adolescence have a high business risk and cannot afford financial risk, while firms in prime and stable can afford the extra risk that accompanies debt financing. Firms in the declining life stages would again experience a growth in business risk and would need to decrease their exposure to debt.

2.2.5 Pecking Order Theory


Myers observed how firms actually structure their balance sheets, and found that firms tend to follow a pecking order in financing their projects: first they use internal equity, then debt, and only then do they use external equity (Myers, 1984). In contrast to Ross (1977), who argued that firms use more debt to overcome information asymmetries and signal better prospects, Myers (2001) used information asymmetries to argue that managers are unlikely to issue equity because
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they fear it will signal that the stock price is overvalued. In addition to the evidence presented by Myers, several other studies have lent support to pecking order theory. For example Allen (1993), like Fama and French (1988 ), found that leverage is inversely related to profitability and performance, which supports the pecking order theory view that debt is only issued when there is insufficient retained income to finance investment. According to the pecking order theory, we might expect firms in infancy, adolescence and go-go, with little retained earnings, to seek the maximum available debt funding before resorting to external equity. Prime and stable firms, in contrast, generate substantial retained earnings and therefore need less debt than they did in their high-growth phase. As they move into the stages of decline, retained earnings will decrease and firms again will increase their debt levels to finance acquisitions of young firms. Pecking order theory, therefore, also suggests a strong relationship between life stage performance and capital structure. In contrast to static trade-off theory, however, pecking order theory suggests a high-low-high pattern of debt ratio over time.

2.3 Strategic Management Research and Capital Structure A firms capital structure refers to the mix of its financial liabilities. As financial capital is an uncertain but critical resource for all firms, suppliers of finance are able to exert control over firms . Debt and equity are the two major classes of liabilities, with debt holders and equity holders representing the two types of investors in the firm. Each of these is associated with different levels of risk, benefits, control and performance. While debt holders exert lower control, they earn a fixed rate of return and are protected by contractual obligations with respect

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to their investment. Equity holders are the residual claimants, bearing most of the risk, and, correspondingly, have greater control over decisions.

Questions related to the choice of financing have increasingly gained importance in management research as it has a bare relationship with performance. Traditionally examined in the discipline of finance, these issues have gained relevance in the past few years, with researchers examining linkages to strategy and strategic outcomes. Bettis (1983) argued that modern capital structure theory and strategic management are based on very different paradigms, resulting in opposing conclusions. He called for more integrative research to resolve the controversies. Strategic management scholars exhibit disparate opinions regarding the possibility of such integration into capital structure. Oviatt (1984) suggested that a theoretical integration between the two disciplines is indeed possible as more and more re structuring of capital within a firm has a significant impact on performance. In contrast, Bromiley (1990) believed that the scope for integration is limited, if at all possible. According to him, capital structure strategy should neither import empirical results from finance, nor should they work towards integration of strategic and financial research. Therefore, while strategy should expand its domain to study areas traditionally considered in finance to increase performance, researchers should be careful to maintain a strategic Perspective on how capital structure should be integrated. Some management researchers have viewed capital structure decisions as arising from the preferences of various stakeholders such as managers (Barton et al, 1987,88), board of directors (Stearns
et al 1993)

and institutional investors (Chaganti et al, 1999). Other researchers have viewed capital

structure as an antecedent to firm strategy, such as diversification into new businesses with

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prime issue on performance (Chatterjee,1990, 91). While these studies have definitely contributed to some understanding of the linkages between performance and capital structure, Does it matter how firms finance their assets? and do different modes of financing make a difference? While anecdotal evidence suggests that the amount and type of financing should be closely tied to a firms strategy and its previous performance (Gupta et al, 1995) few researchers have looked at the strategy/financing interaction (Sandberg et al, 1987). A firm consists of a bundle of resources, some of them able to contribute to sustainable competitive advantage (Penrose, 1959). The financial management function of a firm - including its capital structure decision - deals with the management of the sources and uses of finances. Firms enter into transactions with suppliers of finance raising capital for strategic assets. The different types of financing, however, are also associated with different levels of costs as these affects capital structure.

This paper suggests that the efficient set of transactions, as indicated by an optimal debt-toequity ratio, is determined by the nature of strategic assets in the firm. Therefore, those firms that succeed in setting up the efficient set of transactions will be able to realize the full value of these assets. On the other hand, firms that are not able to determine and/or organize their transactions efficiently (as per asset requirements) will suffer a decline in performance. This decline arises from a decrease in the net benefits available from strategic assets. Consequently, superior financial management matching capital structure to resources can provide a firm added benefit over its competitors.

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2.4 Overview of the banking industry in Ghana


Banking in Ghana started in 1896. In that year, a branch of the Bank of British West Africa (BBWA) was opened in Accra and in the Gold Coast (now known as Ghana). Shortly after the Bank was established, it was able to acquire the business of maintaining the Government accounts. In addition, it was able to introduce the use of cheques in settlement of Government accounts which helped to advertise the usefulness of the Bank to the public (Buckle et al (1999). Buckle stated that, by 1918, the operations of BBWA in the Gold Coast had been so successful that another expatriate bank, the Colonial Bank decided to commence banking. In 1925 the Colonial Bank merged with the Anglo-Egyptian Bank, the National Bank of South Africa and Barclays Bank under the leadership and name of Barclays Bank (Dominion Colonial and Overseas). Barclays soon developed into a strong competitor of BBWA. From the late 1920s until the early 1950s, banking services in the Gold Coast continued to be exclusively provided by these two expatriate banks. Branches were opened in many of the provincial capital towns and in the main trading centres in the Gold Coast Colony, and, subsequently, in Ashanti and the Northern Territories of the Gold Coast. The Bank of Gold Coast Ordinance was passed by the legislature in October 1952. Sir Cecil Trevors report (1952) outlines the business that the bank may be authorised to carry, generally in line with any typical commercial bank as follows:

The accepting of money on deposit, either with or without interest, from and the collection of money for the Government, local authorities, banks and any other persons;

purchase and sale of foreign exchange;

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the making of loans and advances payable on demand or on expiry of fixed period not exceeding six months against certain specified securities (i.e. stocks, gold, silver etc);

the issue of demand drafts made payable at its own offices or agencies; the purchase and sale of securities; the purchase, sale and rediscount of bills of exchange and promissory notes bearing two or more good signatures and maturing within six months from the date of such purchase of rediscount; or within nine months in the case of bills for the purpose of financing seasonal agricultural operations or the marketing of crops;

the acting as agent for the Government and local authorities or any other persons and; the acting as agent or correspondent of a bank incorporated in any country outside the Gold Coast.

In 1953 the Bank of the Gold Coast was set up by the Government and Alfred Engleston, formerly of the Bank of England. Eventually the Bank was split into two: the Bank of Ghana, operating as a bank of issue, to be developed into a complete central bank; and the Ghana Commercial Bank, to be developed into the largest commercial bank with a monopoly on the accounts of public corporations. In July 1957, Alfred Engleston was appointed as the first Governor of the Bank of Ghana (Buckle et al, 1999). Sowa (2005) indicated that after independence, a number of banks were established to fulfill certain developmental goals of the new State. Thus, the National Investment Bank (NIB) which started operations in 1964 was charged with the main object of assisting Ghanaian entrepreneurs in the establishment and expansion of their enterprises. The Agricultural Development Bank (ADB) which originally was part of the Bank of Ghana Rural Credit Unit was formed in 1965 with the aim of reaching smallscale farmers. The third development, the Bank for Housing and Construction (BHC), was

22

established by the state in 1972 to cater for the building and construction industry. It is important to note that the period of the establishment of these banks coincided with the controlled regime when the State arrogated to itself the power to make all economic decisions and allocations, to the exclusion of the private sector. By the late 1980s, the banks had suffered substantial losses from a number of bad loans in their portfolios. In addition, cedi depreciation had raised the banks' external liabilities. In order to strengthen the banking sector, the government in 1988 initiated comprehensive reforms. In regulatory framework, and gradually improved resource mobilization and credit allocation. In 1992 the Government began to privatise, what has for some time been regarded as the flagship in banking, the Ghana Commercial Bank; and in 1994 took steps to divest itself of most of its interests in the Social Security Bank. The liquidation of Bank for Housing and Construction and Ghana Co-operative Bank in January 2000 and the collapse of Bank for Credit and Commerce in June 2000 called for pragmatic approaches in capital adequacy, including holding a capital buffer of sufficient size, enough liquid assets, and engaging in efficient risk management (Amidu, 2007). A critical analysis of some selected banks revealed that Bank for Housing and Construction (BHC) and the Ghana Cooperative Bank (COOP) showed signs of liquidity crunch before their liquidation. On profitability, these banks showed abysmally poor performance while their capital structure ratios did not favour these banks either (BoG, Financial Markets Department, 2000). These led to the enactment of the following Acts: Bank of Ghana Act 2002, Act 612; Banking Act 2004, Act 673 and its subsequent amendments in 2007.

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2.4.1 Recent Developments, Structure and Regulation


Some of the significant changes in banking regulations in Ghana in the past two years include the Banking (Amendment) Act 2007, Act 738 which was enacted, introducing three types of banking licenses; General Banking License (for universal and off-shore banking ),Class 1 Banking License (for universal banking ) and class 2 Banking License ( for off-shore banking). The Credit Reporting Act 2007 (Act 746) and Anti-Money Laundering Act, 2007 (Act 749). BoG also proposed to increase the minimum capital requirement of banks from GHC 7 million to a range of between GHC 50-60 million (BoG, 2007). This is to propel economic growth for the country particular, the amended banking law of August 1989 required banks to maintain a minimum capital base equivalent to 6 percent of net assets adjusted for risk and to establish uniform accounting and auditing standards. The law also introduced limits on risk exposure to single borrowers and sectors. These measures strengthened central bank supervision, improved them to achieve a middle income status. Time table for full compliance is given by BoG as follows: End of 2009 for banks with majority foreign shareholdings (foreign banks); and End of 2012 for banks with majority Ghanaian shareholdings (local banks).

The abolition of the 15% secondary reserve ( in August , 2006) requirements of banks and the reduction of governments overall domestic debt-to-GDP from 29% (2002) to 10.1% (2006) and reduction in the prime rate 24.5% (2002) to 12.5% (2006) also allowed banks to have more money for private sector freed up significant liquidity for lending to businesses. The National reconstruction Levy, which ranged between 2.5% to 5% of profit before tax was abolished at the end of 2006 (The Ghana Banking survey, 2007). Total Domestic Credit for the period under review rose from GHC635.40 million (in 1999) to GHC 7,290.3 million (in 2008) (ISSER,
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2009). Some other recent improvements in the Banking industry include the introduction of the e-zwitch, Automated Cheque codeline clearing system and the supervision of the redenomination of the cedi. The total number of major banks as at 2007 stood at 23. All of these banks were in compliance with the minimum capital requirements of GHC 7 million for universal banking business under class 1Banking license. All but one bank complied with the minimum capital adequacy ratio of 10.00 percent, with an industry ratio of 14.8 per cent (BoG, 2007).

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CHAPTER THREE METHODOLOGY Introduction


This chapter brings to bear the research method adopted for this study; the study actually involves association between performance and capital structure. In view of this, the researcher sought to used data from the secondary source, since data on capital structure and performance of corporate institutions are available both online and other data management consults, these include the financial statements of the banks selected for the study. The chapter outline the regression method adopted for the study as well as the Pearson correlation coefficient to find the strength of association the exist between variables chosen for the study.

3.1 The Research Paradigm.


Research always adopt either one or both paradigm for study, i.e either inductive or deduction.
When data is first collected and then, after analyzing the data a theory is developed consequently, the approach is of inductive nature which is quantitative. On the other hand, if a theory or hypothesis is first developed and then, later a research strategy is designed to test the hypothesis, the approach is of deductive nature Saunders et al. (2007). In this study, empirical findings were based on the use of quantitative nature of the research. Therefore, quantitative approach was applied to this study.

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3.2 The Research Method 3.2.1 The Study Population


The study population comprises all banks licensed by the central bank thus Bank of Ghana (BoG), however, banks under certain categories are not considered to be part for this study, such banks classified as rural bank and licensed by the central Bank of Ghana are not part of the study and does not constitute to be part of the population. Financial services licensed by the central bank also do not constitute to be part of the population for the study. Only banks or commercial banks form the population for the study. The researcher chose this population due to the ever increasing number of merchant and commercial banks operating around the shores of the nation.

3.2.2 Sampling Techniques


The researcher uses a convenience sampling method which is a non probability techniques for the selection of the sample size for the study, the study initially was to include all commercial banks in the country licensed by the central bank and fulfill the study population requirements, as well as having its financial statement available from 2004-2010. Since not all the banks qualify under this category, then the researcher selected the banks that meet the prerequisite for her own convenience. Thus the reason for the convenience sampling method used for the selection of selected banks.

3.2.3 Sample Size


Data were gathered from the Annual Reports of all banks selected for the study in Ghana from 2004 2010. The method of sampling was to include all registered commercial banks of the
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Bank of Ghana with financial statements from within the stated period. In all 24 banks qualified to be included in the sample. Since the study was purposely on the banking sector, commercial banks being licensed by the central bank were all forms part of the study population.

3.2.4 Data Source and Collection Method


Data for this study was secondary taken from the annual financial statements of the selected banks for the stipulated period. Price Waterhouse Coopers Ghana Annual Banking survey and also from the respective published site of the selected banks website repository.

3.3 Data Analysis


Since the research paradigm was quantitative in nature, the researcher used a combination of both descriptive statistics and inferential statistics to analysed her data gathered. Data was analysed by using multiple regression analysis to find the cause and effect of the explanatory variables or the predictor variables on the response or dependent variables, ratios, percentage, mean and standard deviation were outline in a descriptive tables. The panel disposition of the data allows for the use of panel data methodology. Panel data involves the pooling of observations on a cross-section of units over several time periods and provides results that are simply not detectable in pure cross-section studies. Of late, the structure conduct- performance relationship is tested by the panel data method because its results take into consideration structural change as well as cyclical fluctuations (Domowitz et al, 1986). in the analysis of the data, the researcher employ the help of statistical and econometric software tools such as RGui, Microsoft Excel and E-view softwares to aid her to come up with the results

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3.4 Proposed Model Used for the Study


The researcher used a model proposed by Berger and di Patti (2002) and latter adopted by Pratomo and Ismail (2006) that shows the correlation of banks profit and capital structure. The basic model is used by Pratomo and Ismail was altered slightly to suit the needs for this study and to allow for a detach testing of the effect of capital, short-term debt, long-term debt and total debt on profitability. It also allows for inclusion of the age, total assets (sizea) variables and the combination of the loans and investment in securities variables (loinl), which were considered necessary in this particular study.

3.4.1 The proposed model is outlined below


EFCi,t = 0 + CAPi,t + RISK Model ) PROFi,t = 0 + CAPi,t + SDROE i,t + SIZEA (LOINL)i,t + AGEi,t + HERFGi,t + i,t ...1 PROFi,t = 0 + SDAi,t + SDROE i,t + SIZEA (LOINL)i,t + AGEi,t + HERFGi,t + i,t....2 PROFi,t = 0 + LDAi,t + SDROE i,t + SIZEA (LOINL)i,t + AGEi,t + HERFGi,t + i,t ...3 PROFi,t = 0 + TDAi,t + SDROE i,t + SIZEA (LOINL)i,t + AGEi,t + HERFGi,t + i,t ...4 Where: PROFi,t measures bank performance. The researcher measured this variable by using return on Equity (ROE). ROE i,t is EBIT divided by equity for bank i in time t; CAP i,t is Equity capital divided by net total assets for bank i in time t; SDA i,t is short-term debt divided by net total assets for bank i in time t; LDA i,t is long-term debt divided by net total assets for bank i in time t; + SIZEi,t + LOANi,t + SSECi,t + HERFi,t + i,t ..(Basic

i,t

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TDA i,t is total debt divided by net total assets for bank i in time t; SDROE is used to measure bank risk. SDROE i,t is standard deviation of the ROE for bank i in time t from the average ROE of bank i for the study period;

SIZEA i,t is the log of the total assets for bank i in firm t. It is used as a measure of bank size;

LOINL i,t is the log of the total value of loan and investment for bank i in time t; AGE i,t is a measure for bank loyalty. It is calculated as the log of the AGE for bank i in time t;

HERFG i,t is a deposit market concentration using Herfindahl index for bank i in time t; and

i,t is the error term

3.4.2 Research Variables


The researcher used the accounting measure of performance such as the Return on Equity (ROE) to operationalized profitability. The response or dependent variable in this study is Return on Equity (ROE) whereas the explanatory variables include total asset ratio , short-term debt to net total asset ratio ,capital to net total asset ratio , long-term debt to net and total debt to net total asset ratio. Equation 1 was used to find the correlation between bank efficiency as measured by Return on Equity (ROE) and capital ratio (CAP). Equation 2 was used to assess the relationship between ROE and short-term debt ratio whiles Equation 3 was used to investigate the relationship between ROE and long-term debt ratio and
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Finally, equation 4 was used to ascertain the relationship between ROE and total debt.

3.4.3 Variables Rationalization


Response Variable - Return on Equity (ROE) Various studies on performance employs various measures to predict agency cost hypothesis, (Kyereboah-Coleman 2007) . Some of the measures of performance that have been used over the years include financial ratios (Demstz and Lehn, 1985; Gorton and Rosen, 1995; Mehran, 1995), and stock market return and their volatility (Saunders et al., 1990; Cole and Mehran, 1998). Mehran, (1995); also used a financial ratio (ROE) as a measure of firm performance. ROE is used as a measure of bank efficiency in preference to other variables (like return on assets profitability and cost efficiency) that could have been used. Due to the fact that, ROE measures the profitability of a bank relative to equity holders, who are considered the true owners of the firm. The use of earnings before interest and as proxy for profitability further allows the researcher to capture the total returns generated by all the contributors of capital (i.e. the entire capital structure). This makes it possible to also assess the impact of both debt and equity on the performance of banks, Abor (2005).

3.4.4 Predictor or Explanatory Variables

Long-term debt to Net Total Assets (LDA) LDA measures the relationship between long-term debt (all debts of a bank with a lifespan of more than 1 year) and net total assets. It shows the value per cedi of net total assets contributed
31

by long-term loans. This relationship enables the researcher to test the impact of long-term loans on bank efficiency.

Short-term debt to Net Total Assets (SDA) SDA is used to measure the relationship between short-term debt (all Owings by a bank which fall due within a year) and net total assets. It is used to ascertain the portion of net total assets financed by short-term debt. It shows the stake that short-term debt holders have in the business and it is used to assess their impact on bank efficiency.

Capital Ratio (CAP) CAP is the standard measure of leverage in banking research (Pratomo and Ismail, 2006). It allows the researcher to ascertain the portion of net total assets contributed by equity holders. This is then used as proxy to assess the impact of equity capital on bank profitability.

3.4.5 Control Variables


SIZEA This is the proxy for bank size. It is taken to be the total bank assets as against other measures like sales or number of employees. The reason is as a result of the fact that assets are the economic resources controlled by an entity as a result of past transactions from which the entity expects to gain future economic benefits. It follows therefore that the size of a firms assets influences the sales that it can generate or the number of employees to be employed. This proxy allows the researcher to assess the impact that assets in general have on performance. It is expected that total assets will impact positively on the performance of the bank.

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AGE Age is calculated as the log of the number of years of existence for a bank since incorporation (or since commencement of business, where the date for incorporation cannot be ascertained with a degree of precision). Age is chosen as one of the control variables because, all other things being equal, the length of time that a bank has been in existence will not only enable the bank to gain experience in banking in Ghana but also improve its reputation and enhance customer loyalty. These are expected to translate to bank efficiency if the bank can use its experience to gain competitive advantage. This is not measured by the other variables, hence its inclusion in the model.

Standard deviation of Return on Equity (SDROE) SDROE is used to measure the uncertainty of returns to the true owners of the banks. It is a standard measure for risk in investments. In investment, as the risk of an investment increases, return is also expected to be high enough to cover the additional risk being taken by the investors. In other words, as banks engage in risky adventures, the volatility of the earnings should be compensated by higher rewards. Consequently, it is expected that the relationship between SDROE and ROE would be positive.

Total Loans and Investment (LOINL) LOINL is considered as a control variable because banks get a lot of operating income from loans and investments. The granting of loans and credit is the principal activity of banks. It is

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calculated as the total of all loans and advances irrespective of their life spans. Banks major source of revenue comes from this source. Consequently the relationship between loans and ROE is expected to be positive. Another operating activity of banks is the undertaking of investments. Banks earn operating income from this source in the form of discounts, dividend etc and they can have significant impact on the profitability of a bank. It is expected that the higher the amount of a banks investment the higher its return. Therefore it is expected that total loans and investments would have a positive impact on bank profitability. Herfindahl Index (HERFG) HERFG is the square of the deposit market share for a bank for a particular year. The resultant figure is then multiplied by 10,000. Deposit is selected as the basis for calculating HERFG because it is expected that a customers loyalty to a particular bank can be best reflected in the amount he/she is willing to deposit with that bank. Deposits therefore give a justifiable indication of the proportion of the entire market controlled by a bank. Thus banks with larger market share are expected to have higher ROEs signaling a positive association between HERFG and ROE.

3.5 Hausman Specification Test


To determine the use of either random effect mode or the fixed effect model, the researcher employed the used of the Hausman (1978) specification test. The use of Hausman specification test is due to its characteristics which is normaly and commonly used to make the comparison of random and fixed effect model estimates of coefficients. In the random effect model, the intercept is assumed to be random drawing from a much larger population with a constant mean value. The implication of this statement is that the Random effect Model is used when the sample is so large and the data is randomly selected to represent the analysis, Pratomo and Ismail
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(2006). As this research uses data from selected banks in Ghana, the researcher prefers Fixed Effect Model as a representative model. Moreover, to strengthen the result, the researcher analyzed the result of the estimated regression using Hausman Test. The different estimation methods were used to run the multiple regression models.

3.6 Pearson Correlation Coefficients


Person correlation coefficient is a statistical/mathematical tool use to measure the degree or strength of association between two variables or more variables; it always yields a value between -1 r 1 inclusive. When the value r = 1 it shows that there is a perfect positive correlation, whiles r = -1 means that there is a perfect inverse correlation. A value r near zero means there is no clear relationship exists between the two variables, moreover, the measure also assumes an assumption of values of 0.7 (absolute) and above is considered to be more correlated or have a strong degree of association between the two variables involved, values from 0.5 -0.699 (absolute) is also considered to have an association either positive or inverse depending on the sign associated with the value.

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CHAPTER FOUR DATA PRESENTATION, ANALYSIS AND DICUSSIONS Introduction


This chapter deals with the descriptive statistics of the various predictor various and its association with the performance indicator, correlation analysis have also been discussed to find the strength of relationship between the variables used. Regression analysis have also be employed in this chapter of the various models to find the impact of the various predictors variables contribution to the performance of banks in Ghana.

4.1 Descriptive Statistics


Table 4.1 Descriptive Statistics Descriptive statistics gives the means and equips the researcher to have a fair view of the values from the data processed. Form table 4.1, it gives information about the descriptive statistics of the dependent/response variable, the independent/predictor variables as well as the control variables used in the collection of the data for the entire discussions. From the table, it is evident that, a greater percentage of the capital structure of banks in Ghana is made up of debt accounting for about 81.68 percent of the banks capital. Short term debt was also revealed to accounts for about 79.34 percent of total capital whiles long term debt accounts constitute for 6.56 percent. Apparently short term debt accounts for a higher source of funding for most banks in Ghana with a greater portion coming from customer deposits. Nevertheless, long term debt financing proves otherwise, as it does not seem to be a major source of funding for the banks in Ghana. These findings are noted to be in agreement to existing literature, (Abor, 2005; Amidu,

36

2007). Amidu (2007) reveals that more than 87% of the banks in Ghana are financed by debt and that average long-term debt represents around 8.2%. Evidently, it has also shown that the banks in the industry operate above the minimum required capital adequacy ratio of 10percent as it was found that, the mean capital ratio of banks in Ghana is 13.86 percent. The low standard deviations of 3.75 percent (equity capital) and 12.77 percent (total debt) attest to the fact that almost all the banks in Ghana sources of funding are similar and do not vary. The performance indicator (ROE) has a mean of 82.57 percent and a standard deviation of 54.65 percent, which shows that, clearly, the banking industry performed extremely well in the period under review but it is also obvious since the standard deviation is quite large it indicates that not all the banks are benefiting from this high industry performance , some are actually not doing their best. The average risk level in the industry was 0.3476 with a deviation of 38.54 percent. Which shows a fairly stable risk among banks. The mean of total assets (log) was 6.24 (standard deviation of 70.24 percent) whiles that of total loans and investments (log) was 6.59 (with a standard deviation of 63.82 percent). The extremely high level of standard deviation of firm-level deposit-herfindahl Index suggests that the banking industry is concentrated with only few banks in Ghana control the total deposits in the industry. This may offer support for the high disparity in ROE, total assets and total loans and investments. Probably these disparities are as a result of the fact that some of the banks have been in existence for far more years than others (the standard deviation of the log of age is 58.72 percent whiles the average age (log) is 2.0586).

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Table 4.1 Descriptive Statistics of Variables Variable ROE CAP SDA LDA TDA SDROE SIZEA LOINL AGE HERFG Observation 24 24 24 24 24 24 24 24 24 24 Mean Value .8256876 .1385680 .7934057 .0655987 .8167868 .3476450 6.239879 6.589452 2.058645 57.81113 Std. Dev .54659 .03752 .13363 .14036 .12774 .38549 .70236 .63821 .58724 133.271

4.2 Pearson Correlation Analysis


Pearson correlation matrix was found to enable the researcher to find, it there exist multicollinearity among the predictor variables. As explained in chapter three. Person Correlation coefficient is a statistical/mathematical tool use to measure the degree or strength of association between two variables or more variables; which always leads to yield a value between -1 r 1 inclusive. The value r = 1 shows a perfect positive correlation or strength of association, whiles r = -1 means a perfect inverse correlation or strength of association. A value r near zero indicates no clear relationship existences between the two variables, moreover, the measure also assumes an assumption of values of 0.7 (absolute) and above is considered to be more correlated or have a stronger degree of association between the two variables involved, values from 0.5 to 0.699 (absolute) is also considered to have an association either positive or inverse depending on the sign associated with the value.

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Table 4.2: Pearson Correlation Coefficients ROE ROE CAP SDA LDA TDA SDROE SIZEA LOINL AGE HERFG 1.0000 CAP -0.4984* 1.0000 SDA 0.3287* LDA 0.1276* TDA 0.5428* SDROE 0.3875* SIZEA 0.0397 -0.2698* 0.2404* 0.0228 0.2876* -0.2376* 1.0000 LOINL 0.0543 -0.3167* 0.2431* 0.0510 0.3015* -0.2325* 0.8502* 1.0000 AGE 0.0415 -0.1187 0.03462 0.0583 0.1033 -0.2056* 0.6238* 0.6743* 1.0000 HERFG 0.2013** -0.2246*** 0.2104* -0.1645** 0.1043 -0.2376* 0.5187* 0.5437* 0.6548* 1.0000

-0.67808* -0.0674 1.0000

-0.6875* -0.2167* 0.2314* -0.0491 0.2346* 1.0000

-0.6157* 0.5784* 1.0000 0.4033* 1.0000

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Correlation Analysis

Clearly, the performance indicator (ROE) has a significantly inverse relationship with capital, a significantly positive relationship with short-term debt, long-term debt total debt, and risk and deposit herfindahl index, even though the strength of association was great, however, it shows a significance which cannot be ignored. Although ROE exhibits a positive relationship with total assets, total loans and investments and age, these relationships are not significant. Equity capital (CAP) has a significantly inverse relationship with all the control variables except for age (with which the negative relationship is not significant) however, LDA also shows insignificance of the relationship. The relationship between SDA and all the control variables is significantly positive except for age (with which the positive relationship is not significant). LDA exhibits an insignificantly positive relationship with total assets, total loans and investments and age but a significantly positive relationship with herfindahl index. On the other hand LDAs relationship with risk is inverse and insignificantly. Statistically, the relationship between Total debt and risk, total assets and total loans and investments is significantly positive but although total debt has positive relation with age and herfindahl index, the relationship is not significant. The high magnitude of the correlation coefficient of the relationship between total asset and total loans and investments indicates the presence of multicollinearity. However, a forward regression was used to analyzed the data to include the multicollinearity variables. wise regression for the inclusion of the two variables. * Denotes significant at 1 percent ** Denotes significant at 5 percent *** Denotes significant at 10 percent
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4.3 Regression Results from Stata 10 Output


Table 4.3A: Regression Result for Model One, with Total Assets Anova Table Source | SS df MS Number of obs = 168 F(6,167) = 2.10 Prob > F = 0.0121 R-squared = 0.97132 Adj R-squared = 0.7265 Root MSE = 0.8186

-------------+----------------------Model | 3654.82611 6 161 609.1376 0.67011

Residual| 107.888177

-------------+-----------------------Total | 3762.71429 167 615.48396

-------------+-----------------------Coefficients --------------------------------------------------------------ROE | Coef. Std. Err. t P>|t| [95% Conf. interval]

-------------+-------------------------------------------------CAP |-4.51978 .5440752 -2.16 0.020 -5.1285967 -3.0246395 SDROE |.3076805 .212417 -3.43 0.042 .0148144 .5005465 SIZEA |.3655441 .213041 AGE |-.065441 .353041 1.86 0.000 2.89 0.160 1.60 0.060 1.34 0.123 .0468094 -.468094 -.0018094 -3.47101 .6778976 .1778976 .0008976 5.01403

HERFG |-.000651 .0053041 _cons | -2.152 1.31881

-------------+--------------------------------------------------

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Table 4.3B: Regression Result for Model One, with Loans and Investments Anova Table Source | SS df MS Number of obs = 168 F(6,167) = 2.10 Prob > F = 0.0035 R-squared = 0.94915 Adj R-squared = 0.8364 Root MSE = 1.19814

-------------+----------------------Model | 4314.34171 6 161 719.05695 1.435547

Residual| 231.12307

-------------+-----------------------Total | 4545.46478 167 720.92497

-------------+-----------------------Coefficients --------------------------------------------------------------ROE | Coef. Std. Err. t P>|t| [95% Conf. interval]

-------------+-------------------------------------------------CAP |-4.3951 .812706 -4.40 0.000 -5.34875 -3.055732 SDROE |.309346 .147549 -3.23 0.003 .09432 .524407 LOINL |.482370 AGE |-.16345 .134103 .1156307 .000562 1.47 -2.09 -1.63 -1.34 0.000 0.240 0.081 0.003 .02543 -.36737 -.00286 -3.7010 .6759970 .1505689 .0000874 -.0103664

HERFG |-.00074

_cons | -1.673 1.00321

-------------+--------------------------------------------------

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4.3.1 Discussions from Model One on Bank Performance, Bank Capital and the Control Variables
Table 4.3A gives the results of the first model which aims at testing the relationship between bank performance, bank capital and the control variables, as indicated in the table, the anova tables shows a significant differences in the averages of the bank capital and the control variables and hence has R-square of 0.97132, which indicates that, the capital and the control variables accounts for 97.132 percent in the changes of the performance variable (ROE). The results of the constants in the coefficient table in table 4.3A indicates that that equity has a significantly an inverse relationship with firm performance (ROE). These results interprets to mean that banks with high amount of capital are unfavorably affecting its performance and that increasing a banks capital does not increase its profitability. The low level of debt in high equity capital structures reduces bank responsibility towards debt holders, in terms of interest and principal payments. This also declines the threat of insolvency. As a result, management would not be under pressure to increase profit in order to meet the banks periodic debt repayments. These findings are in agreement with the agency costs hypothesis higher leverage or lower equity capital ratio is associated with profit efficiency, all else equal. Moreover, total asset, total loans and investments all have a significantly positive relationship with performance. These are found to be in consistent with the usual known paradigm larger banks are better diversified and can thus hold less capital to buffer against losses. Thhis also confirms the general knowledge that businesses generate economic benefits from the assets it acquires.if and only if they are managed efficiently. Also loans and advances given out and investments undertaken enable banks to increase their profitability by increasing their interest income, interest received, dividend income and other investment income. Risk has the expected

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impact of positively affecting performance. Also high risk investments and adventures undertaken by banks are normally associated with higher returns because of the extra rewards demanded for taken on additional risk, thus increasing bank performance. Unexpectedly, Age and Deposit herfindahl index give inverse relationship with bank erformance even though these relationships are not statistically significant since P> 0.05 both in table 4.3A, B . The age factor may be an indication of the fact depositors and/ borrowers do not consider the duration of a banks existence when selecting a bank to deal with. However, the negative sign of deposit herfindahl index is a carefulness to banks on how efficiently they are managing the proportion of deposits that they control. It clearly shows that the larger the volume of deposits controlled by a bank, the lesser its performance; even though this is not significant when total assets are use in the model thus table 4.3A. But the significantly inverse relationship between herfindahl index and bank performance when total loans and investments are used in the equation thus table 4.3B makes it much more worrying. It appears that, some banks are not managing their deposits well, therefore leading to affecting its performance.

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Table 4.4A: Regression Result for Model Two, with Total Assets Anova Table Source | SS df MS Number of obs = 168 F(6,167) = 2.10 Prob > F = 0.0136 R-squared = 0.94802 Adj R-squared= 0.87745 Root MSE = 1.36006

-------------+----------------------Model | 5431.62151 6 161 1456.3992 1.849756

Residual| 297.810707

-------------+-----------------------Total | 5729.432217 167 1458.24896

-------------+-----------------------Coefficients --------------------------------------------------------------ROE | Coef. Std. Err. t P>|t| [95% Conf. interval]

-------------+-------------------------------------------------SDA |1.256439 .464824 2.59 0.000 0.534287 3.0003434 SDROE | .458206 .128346 SIZEA | .630286 AGE .137704 3.77 -1.25 -1.88 -1.38 -4.34 0.014 0.033 0.067 0.028 0.023 .277032 .365201 -.462012 -.0020934 -7.482001 .7322765 1.0036724 .0270046 .0006655 -2.5234013

|-.274305 .153030

HERFG |-.003361 .000934 _cons |-4.57204 1.44034

-------------+--------------------------------------------------

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Table 4.4B: Regression Result for Model Two, with Loans and Investments Anova Table Source | SS df MS Number of obs = 168 F(6,167) = 2.10 Prob > F = 0.0010 R-squared = 0.96375 Adj R-squared = 0.9251 Root MSE = 0.83707

-------------+----------------------Model | 2999.4624 6 161 499.9104 0.70070

Residual| 112.81377

-------------+-----------------------Total | 3112.27617 167 500.61111

-------------+-----------------------Coefficients --------------------------------------------------------------SDA | Coef. Std. Err. t P>|t| [95% Conf. interval]

-------------+-------------------------------------------------CAP |1.259804 .407153 2.68 0.010 2.996548 2.02635773 SDROE |.5076577 .202107 3.44 0.024 .2180841 .7405445 LOINL |.6350412 .130466 AGE |-.276451 .123030 5.06 0.003 -2.14 0.000 -2.06 0.037 5.39 0.003 .4064504 -.448007 -.002007 -7.50131 .9628960 -.0789655 .0000726 -3.349093

HERFG |-.001368 .000504 _cons | -5.1502 1.00038

-------------+--------------------------------------------------

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4.3.2 Discussions on Model Two on Bank Performance, Short term Debt and Control Variables
On the other hand short term debt, was noted to have a direct positive relationship with performance which also depicts to be a significantly positive relationship with ROE. This confirms the fact that, the more short-term debt a bank holds on its capital structure the higher its performance. The lower cost and risk of short term debt financing could be the main reason for its direct positive relationship with performance. As a result banks benefit greatly when they use more short-term debt. Both table 4.4A and 4B shows that the predictor variables , thus SDA and the other control variables accounts for much of the variation in the performance indicator (ROE) from the various banks. Age and deposit herfindahl index show a significantly inverse relationship with performance while risk, total asset, total loans and investments show a statistically positive relationship with performance, moreover significant. These suggest that banks which have been in existence for relatively long have not been successful in cashing in on first-mover advantages. It could also be as a result of their inability to manage some of their assets well. Furthermore it is also probable that long-term- existent-banks have not been relatively successful in the management of their reputation as compared to banks which are new in the industry. It can be conclude that, these results are unfavorable to banks in the industry that have existed for longer years in the industry.

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Table 4.5A: Regression Result for Model Three, with Total Assets Anova Table Source | SS df MS Number of obs = 168 F(6,167) = 2.10 Prob > F = 0.0001 R-squared = 0.97281 Adj R-squared = 0.9254

-------------+----------------------Model | 3558.2673 6 161 593.04455 0.617809

Residual| 99.4672

-------------+-----------------------Total | 3657.7345 167

593.66236 Root MSE = 0.78601

-------------+-----------------------Coefficients --------------------------------------------------------------ROE | Coef. Std. Err. t P>|t| [95% Conf. interval]

-------------+-------------------------------------------------LDA |1.03934 .44054 2.36 0.022 .124904 1.02395 SDROE |.571940 .12310 SIZEA |.565403 .130841 AGE |-.36704 .157045 3.99 4.02 -2.57 -0.44 0.002 0.000 0.100 0.840 .3114407 .3668904 -.568494 -.0014043 -5.47501 .854605 .8775926 -.0789716 .0009706 -1.51033

HERFG |-.00019 .000504 _cons | -3.757 1.04489

-3.44 0.003

-------------+--------------------------------------------------

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Table 4.5B: Regression Result for Model One, with Loans and Investments Anova Table Source | SS df MS Number of obs = 168 F(6,167) = 2.10 Prob > F = 0.0121 R-squared = 0.95683 Adj R-squared = 0.9259 Root MSE = 1.0658

-------------+----------------------Model | 4053.6141 6 161 675.6023 1.135948

Residual| 182.8877

-------------+-----------------------Total | 4236.5018 167 676.738248

-------------+-----------------------Coefficients --------------------------------------------------------------ROE | Coef. Std. Err. t P>|t| [95% Conf. interval]

-------------+-------------------------------------------------LDA |.983478 .440520 2.23 0.021 .125673 1.924395 SDROE |.572680 .1124172 3.68 0.002 .342815 .750567 LOINL |.655440 .1521045 AGE |-.36744 .1173043 4.06 -3.19 0.49 -4.34 0.000 0.100 0.660 0.003 .396895 -.648104 -.00137 -5.9471 1.077971 -.578376 .000795 -2.019034

HERFG |-.000259 .005043 _cons | -4.152 .9431816

-------------+--------------------------------------------------

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4.3.3 Discussions of Mode Three on Bank Performance, Long-term Debt and the Control Variables
Long term debt which forms part of financing shows a significantly positive relationship with performance indicator (ROE), Long term debt is generally scarce and expensive, which comes with terms and conditions which indirectly work for the good of the organization, such as restrictive covenants, collateral requirements, fixed repayment terms leave management with no option but to remain profitable in order to safeguard the interest of shareholders and other stakeholders. This result, is not in Abor (2005), In his paper, he found that, the relationship between long term debt and Ghanaian listed firms profitability was found to be significantly negative. The reason, which does not differ significantly from the afore mentioned studies is the fact that long-term debts are relatively more expensive, and therefore employing high proportions of them could lead to low profitability. In this particular study, it appears that the financial benefits of long-term usage far outweigh the cost, this may also be due to the short period used for the study. Ages if firms contribution shows inverse relations with performance. Nevertheless, risk, total asset, total loans and investment maintain their significantly positive relationships with bank performance. In this model deposit herfindahl index depicts an insignificantly inverse relationship with performance. Consequently it reveals that banks management of the proportion of deposits controlled is improved when they use high long term debt in financing. In effect, long term debt increases management ability in asset maximization and enables them to be scrupulous in the application of scarce bank resources.

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Table 4.6A: Regression Result for Model Four, with Total Assets Anova Table Source | SS df MS Number of obs = 168 F(6,167) = 2.10 Prob > F = 0.0021 R-squared = 0.75336 Adj R-squared = 0.7198 Root MSE = 2.85011

-------------+----------------------Model | 3994.7452 6 161 665.7909 8.123153

Residual| 1307.8277

-------------+-----------------------Total | 5302.8277 167 673.91405

-------------+-----------------------Coefficients --------------------------------------------------------------ROE | Coef. Std. Err. t P > |t| [95% Conf. interval]

-------------+-------------------------------------------------TDA |3.00348 .444752 5.64 0.020 1.12346 4.0002432 SDROE |.376105 .102459 SIZEA |.399543 .13843 AGE |-.09856 .113005 3.11 0.000 .0146504 .1046894 -.304016 -.001704 -6.5711 .5775065 .6678760 .070871 .0002964 -3.06438

2.98 0.000 -1.59 0.107

HERFG |-.000616 .000301 -1.21 0.160 _cons | -4.956 1.00481 -4.91 0.100

-------------+--------------------------------------------------

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Table 4.6B: Regression Result for Model Four, with Loans and Investments Anova Table Source | SS df MS Number of obs = 168 F(6,167) = 2.10 Prob > F = 0.0001 R-squared = 0.79702 Adj R-squared = 0.7395 Root MSE = 2.619307

-------------+----------------------Model | 4337.2267 6 161 722.8711 6.86077

Residual| 1104.5845

-------------+-----------------------Total | 5441.8112 167 729.73187

-------------+-----------------------Coefficients --------------------------------------------------------------ROE | Coef. Std. Err. t P>|t| [95% Conf. interval]

-------------+-------------------------------------------------TDA |2.59178 .407512 6.16 0.020 1.12597 3.524395 SDROE |.363420 .125415 3.03 0.042 .16812 .620046 LOINL |.650347 .123053 AGE |-.28555 .151645 3.89 -2.39 -1.60 -5.34 0.000 0.160 0.060 0.123 .0468094 -.468094 -.0018094 -3.47101 .767876 .007897 .000197 -3.540327

HERFG |-.000741 .00030 _cons |-4.96752 .99514

-------------+--------------------------------------------------

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4.3.3 Discussions of Model Four on Bank Performance, Total Debt and the Control Variables
Model 4 rsults, as indicated in table 6A, B indicates that, the total debt and the control variable accounts for more variations in the performance of the bank, it clearly exposes that, the relationship between total debt and performance is significantly positive. The results confirms earlier findings in this study on capital, short term debt and long term debt; leverage increases performance of banks in Ghana. This means that increasing the level of debt in the capital structure of a bank results in higher performance. This notwithstanding, banks are also advised against excessive debt which can be recipe for insolvency and financial distress. This indicates that, bank could result in debt financing within a controllable limit which wont affect its operations to put it into financial distress. The relationship between performance and risk, total assets, total loans and investments were also noted to be positive and significant. Conversely, in table 4.6B, deposit herfindahl index shows a inverse but insignificant relationship with performance. Also, age has a significantly negative relationship with performance when total loans and investments are employed in the equation but not when total assets are employed.

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CHAPTER FIVE SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS Introduction


The earlier literatures such as the work of Modigliani and Miller opened the debate for studies on the effect of capital structure on firm performance; however it still remains a puzzle in the finance sector. Although various literatures by and large agree that capital structure has an effect on firm performance, the direction of this effect is largely inconsistent with the various studies so far. While some reveal that debt has a positive effect on firm performance, others have proven otherwise. This study sought to provide further evidence on the effect of capital structure on firm performance, by using data from financial institutions, with respect to banks in Ghana.

5.1 Summary of findings


The debate of capital structure on firms performance continues to gain attention in the financial sector research works. Numerous literatures on the topic have contributes enough to bring an end to the discussions, however, contended in results still opens the it wide for a thorough work to be done in the topic. This study contributes to the existing literatures by using data from banks to provide further evidence on the ongoing debase on the association or impact of capital structure and firms performance.

5.1.1 Key findings


The researcher came across various findings of which they are in agreement with some existing literatures, these include the following.

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The study confirms that, debt or leverage in any form tends to increase the entire profitability of bank and hence leads to higher performance, unexpectedly, and contrary to some existing literatures, long-term debt was also found to affects bank profitability positively, even though they account for a minimal percentage of bank capital, whereas that of short term tends to have a significant impact on the profitability of banks in Ghana. Nevertheless, the use of equity reduces bank profitability, as it also was found to have an inverse relationship with the performance indicator (ROE).

Additionally, Banks risk was found to be associated with high performance, nevertheless age of banks and deposit herfindahl index was found to have an inverse relationship with bank performance. Clearly it was also found that, bank assets (bank size) held also increases bank profitability as well as total loans and investments also increase bank profitability. Besides, since both the short-term and long term leverage have a positive impact on the profitability on the bank, it was generally, find that, the total debt of the bank contributes to its performance, however, the performance increases if the short term debt accounts for more of the debt due to its low risk and high interest. Specifically, the descriptive statistics indicates and brings to bear that, Banks in Ghana are highly leveraged. Accounts for 81.68 percent of bank assets are provided by debt thus either in any form of leverage which were found to have a positive impact on performance. Furthermore, most banks in Ghana use more short-term debt 79.34 percent as against long-term debt which accounts for 6.56 percent. Evidently, the banks were found to operate above the required minimum capital adequacy ratio of 10%. The results give must to be believed that, the average capital of banks in Ghana is about 13.86 percent.

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Findings on Hypothesis Clearly as indicated in all the Anova tables for all the models indicates that, there is a relationship between the profitability and capital structure since all the p < 0.05, therefore we fail to accept the null hypothesis that there is no relationship between the profitability and capital structure.

5.2 Conclusions
The findings discovered were consistent with existing literature on firms and performance with insignificant difference. The results clearly indicates that, banks in Ghana do well when they apply more debt both short-term debt and long-term debt in the financing of their activities. As a result, increase in bank capital structure is discouraged and should be done with much care, increase in bank debt - especially short-term debt - is encouraged. Nevertheless, banks are advised against excessive debt levels because of the inverse consequences associated with high debt usage. Which tends to agree with the agency cost hypothesis, under which high leverage corporate tends to reduce agency costs? It is imperative therefore, that banks in Ghana strategies their capital structure.

5.3 Recommendations
Based on the findings observed earlier, the following recommendations are suggested

From the analysis, debt was found to be highly associated with high performance. Banks with high debt have high return, irrespective of the nature of debt used, however, short term debt is
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the preference. Therefore it is recommended that, banks are encourage to increase their level of debt, however careful measures should be taken not to drive the bank into insolvency.

Moreover, due to the effects of the capital structure on the various performance of a firm, it will be recommended that, banks should only increase their capital when they are operating below the required minimum capital adequacy ratio to provide protection for its depositors Banks are rather encourage to create innovations in their products to bring in more of their clients to save more, since banks could finance their debt or use its leverage to effectively manage the short term and the long term debt. savers amount could be used to service these debts and will shield the bank from borrowing from the central bank to increase profitability and hence performance. What is more, most banks use short term debt and most of these short term debt are in the form of customer deposits such as fixed, savings accounts, current accounts and other time deposits. Banks in Ghana should therefore find more ways of attracting while discouraging withdrawals. Again more efficient deposit-withdrawal management can give banks virtually free capital which also has the potential to increase their performance. Furthermore, it appears that banks in Ghana do not benefit from the proportion of customer deposits they control. Likewise on the academic front, it is recommended that, capital structure and firms performance relationship could be analyzed by using data set from a hybrid of financial institutions such as insurance firms, and other financial institutions licensed by the central bank.

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