Financial Market Development and Capital Structure of Listed Firms – Empirical Evidence from Ghana
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Date
2011
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Abstract
This study explores the relationship between financial market development and choice of finance
(debt-equity) of listed firms in Ghana in a panel data framework.The core concern of this study is to
test whether debt and equity finance are complements or substitutes. The study used panel data which
involves pooling of twenty-one listed firms on the Ghana Stock Exchange (GSE) over the period
1995-2005. The study finds evidence of complementarity between banking and stock market
developments in financing decisions of listed firms in Ghana. The stock market development is
indicated to have a positive effect on the capital structure decisions of listed firms. However,
substitution effect between debt and equity mainly in favour of equity financing sets in as the
financial landscape develops further. This finding emphasises the important role equity markets in
developing countries play in capital structure of listed firms.
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Keywords
Financial market Development, Financial market Development, Complementarity, substitute, Ghana