Capital structure dynamics of listed banks in Ghana

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May, 2016
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It is well known that firms are more likely to issue equity when their market values are high, relative to book and past market values, and to repurchase equity when their market values are low. We document that the resulting effects on capital structure are very persistent. As a consequence, current capital structure is strongly related to past market values. The aim of this paper is to provide a comprehensive review on Capital Structure Dynamics of Listed Banks in Ghana The study examines the significance of performance on equity and leverage. Seven (7) Banks on the Ghana Stock Exchange were used for the periods 2005 to 2012.. The study found Asset Tangibility and non-debt tax shield to have a positive relationship with equity. The study also discovered that, size of a bank was a significant determinant of equity and also has a positive association with equity. There was a positive relationship between performance and equity. There was also negative relation with Growth opportunity of a bank, Dividend policy and equity. Performance and size of a bank are the determinants of leverage. There was a statistically significant positive relation with leverage and a negative statistically significant relation with the size of a bank. The study found Leverage to have positive relation with Asset Tangibility, non-debt tax shield and Dividend ratio. The study also discovered a negative association between Growth Opportunity of a bank and Leverage.
A thesis submitted to the Department of Economics in part fulfillment of the requirements for the award of the degree of Master of Science honors in Economics,