Abstract:
The central objective of this study is to assess the effect of capital structure on performance of OMCs in Ghana. The data sample consists of six oil marketing companies that have been in
continuous existence from 2010-2015. The study employed panel regression models to
examine the relationship between capital structure and performance of OMCs in Ghana.
The results of this study show that the analysis of leverage and firm performance relationship
produces mixed outturns. The leverage has a positive relationship with return on equity but
relates inversely with return on asset. These findings found support for both the bankruptcy
cost and tax benefits arguments.
The study results also suggest that the size of the firm has positive and significant effects on
return on assets (ROA) and return on equity (ROE). The larger firms have easier access to
external funds and are most likely able to meet their investment needs thus increasing their
profitability. The results of the regression analysis show that the liquidity ratio produces
negative effects on return on asset. This finding confirms the liquidity and profitability trade
off theory.
