Testing the pecking order theory of banks listed on the ghana stock exchange
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Date
2021
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KNUST
Abstract
The research examined the pecking order theory practice of banks listed on the Ghana Stock Exchange. The link between leverage and firm specific characteristics such as profitability, loan quality, growth, age and size of firms was ascertained. The research used quantitative approaches and employed the descriptive designs. Secondary data from the annual financial statements of banks listed on the Ghana Stock Exchange from the year 2010 to 2019 were used for the studies. As at the end of the year 2019, eight (8) banks were listed consisting of Ecobank Ghana Ltd, Societe Generale, Standard Chartered Bank, Cal bank, Agricultural Development Bank, Access Bank, Republic Bank, and Ghana Commercial Bank. The data was analyzed using version 25 of Statistical Package for Service Solution. The Augmented Dickey Fuller, Tolerance, Durbin Watson and Variance Inflation Factor tests were used as estimation techniques to ensure accuracy of data. Panel data regression method was used to establish the presence of the pecking order theory. The study found that leverage was negatively related to profitability of listed banks but was statistically insignificant. Leverage was also negatively related to loan quality but statistically insignificant. Leverage showed positive correlation to the size and the age of the firm and was statistically significant, while leverage was positively correlated to growth but insignificant. The study recommends that management of the banks listed put in the necessary measures such as ensuring quality loans and using debt as financing strategies to enhance an increase in the growth levels of firms
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A thesis submitted to the institute of distance, kwame nkrumah university of science and technology, kumasi in partial fulfilment of the requirements for the award degree of master of science in accounting and finance