The effect of capital structure on profitability: an empirical analysis of listed firms in Ghana

Purpose This paper seeks to investigate the relationship between capital structure and profitability of listed firms on the Ghana Stock Exchange (GSE) during a five‐year period. Design/methodology/approach Regression analysis is used in the estimation of functions relating the return on equity (ROE) with measures of capital structure. Findings The results reveal a significantly positive relation between the ratio of short‐term debt to total assets and ROE. However, a negative relationship between the ratio of long‐term debt to total assets and ROE was found. With regard to the relationship between total debt and return rates, the results show a significantly positive association between the ratio of total debt…