Original Research

The determinants of capital structure of microfinance institutions in Ghana

Anthony Kyereboah-Coleman
South African Journal of Economic and Management Sciences | Vol 10, No 2 | a587 | DOI: https://doi.org/10.4102/sajems.v10i2.587 | © 2013 Anthony Kyereboah-Coleman | This work is licensed under CC Attribution 4.0
Submitted: 04 April 2013 | Published: 09 April 2013

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Anthony Kyereboah-Coleman, University of Ghana Business School

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Using a panel data methodology, this study examines the determinants of capital structure of 52 microfinance institutions (MFIs) in Ghana. The empirical results show that the MFIs are highly leveraged and that their capital structure is explained partly by standard finance theory and by other unconventional variables. Specifically, the study confirms that leverage is positively related to asset tangibility, with small MFIs using short-term and large MFIs using long-term debt. Though, the findings confirm that leverage is inversely related to risk, they also suggest that some MFIs enjoy long-term debt in spite of risk, while profitability is irrelevant in explaining the capital structure decisions of MFIs. Finally, the study shows that the reputation and board independence of MFIs significantly and positively affect their capital structure decisions.


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