Capital structure, financial performance and sustainability of Microfinance Institutions (MFIs) in Ghana

Dabi, Rowland Seyram Koku; Nugraha,; Disman,; Sari, Maya

doi:10.1080/23322039.2023.2230013

Cited by 11 publications

(1 citation statement)

References 61 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Several theories have been established to comprehend the correlation between capital structure choices and the value of a company. The Modigliani-Miller (MM) theory, which was first proposed in 1958, posited that in a market characterized by perfect competition, the valuation of a corporation is not influenced by its capital structure (Dabi et al 2023). Nevertheless, the revisions put out by (Modigliani and Miller 1963) recognized the potential of debt to enhance value and advocated for predominantly using debt-based financing.…”

Section: Review Of Literaturementioning

confidence: 99%

Effect of Capital Structure on the Financial Performance of Ethiopian Commercial Banks

Muhammed,

Desalegn,

Emese

2024

Risks

View full text Add to dashboard Cite

This study aimed to examine the effects of capital structure on the financial performance of Ethiopian commercial banks. The dependent variable, financial performance, is measured by Return on Assets (ROA), while factors such as loan-to-deposit ratio (LDR), asset-to-total equity ratio (ATER), total deposit-to-total asset ratio (TDTAR), capital adequacy ratio (CAD), and asset growth ratio (GA) were used as proxy independent variables to gauge capital structure. Using a quantitative approach and an explanatory research design, this study analyzes 6 years of audited financial reports from 14 commercial banks in Ethiopia. This investigation employs a random effect regression model and Stata 14 software package to explore the relationships among these variables. The result revealed that both the loan-to-deposit ratio and the total deposit-to-total asset ratio have a positive and significant impact on financial performance, while the asset growth ratio showed a negative effect. Based on these findings, this study recommends that bank authorities concentrate on bolstering their deposit base, managing asset growth efficiently, maintaining adequate capital levels, and optimizing leverage levels to improve financial performance and ensure long-term sustainability in the banking sector. Additionally, this research is anticipated to inform policymakers about regulatory frameworks for banks and assist banking managers in formulating effective capital financing strategies within the Ethiopian commercial banking sector, thus enriching the existing literature on the relationship between capital structure and financial performance.

show abstract

Section: Review Of Literaturementioning

confidence: 99%