An Empirical Analysis of Leverage and Financial Performance of Listed Non-Financial Firms in Ghana

Abstract

This research examines the nexus between leverage and profitability of non-financial firms listed on the Ghana stock exchange from 2004 to 2010 using panel data methodology. This study is exploratory in nature and uses Generalised Least Square Regression (GLS) with profitability indicators (Return on Asset, Return on Equity and Net Profit Margin) as dependent variables and inflation rate, exchange rate and gross domestic product as independent variables with firm size and sales growth as control variables. The data was edited, sorted and entered into Microsoft excel and exported into Eviews 7 and was then processed with GLS bearing in mind the dependent and independent variables. On the average, the study found out that non-financial firms listed on the Ghana Stock Exchange used 55% debt and about 45% equity with 48% short term debt in the debt structure.