Determinants of capital structure decisions: an empirical analysis of small and medium enterprises in Ghana from 2016 to 2020

This study aims to empirically explore the determinants of capital structure decisions among small and medium-sized enterprises (SMEs), comprising around 70% of businesses in Ghana. Achieving an optimal balance between debt and equity is critical to business survival. This study utilised data collected through face-to-face interviews with 121 SMEs across 12 regions in Ghana from 2016 to 2020, employing a mixed-method approach that integrated quantitative and qualitative data. The primary data were entered into Microsoft Excel and Stata for analysis. Managerial ownership, asset structure, and stakeholders' cultural backgrounds emerged as significant determinants, with managerial ownership showing a higher marginal effect. By contrast, there is an inverse causal relationship between profitability, business location, and the leverage ratio. The study recommends reducing the cost of borrowing by lowering the policy rate, government initiatives for affordable loans to SMEs, and enhancing the physical asset capacity for collateral during loan acquisition.