Assessing the Debt Performance and Policy of SMES; the Case of Northern and Southern Ghana

Abstract

Capital structure has been proven to impact business performance in previous research, particularly on big enterprises. Although the topic has gained a lot of publicity, the focus on SMEs, mostly between the North and South of Ghana, is generally absent from the literature. The study assessed the relationship between debt and Policy performance of SMEs in northern and Southern Ghana from 2011 – 2021 using panel data regression. The results from the T-test reveal that capital structure is not equal or the same across the north and south of Ghana. However, there was a positive relationship between firm size and sales growth (SG) and trade credit respectively in Techiman. In Accra, the results show a positive relationship between short-term debt (SDC), total credit (TCC), and return on assets (RoA) at 1% significance level respectively. However, there was a statistically significant and negative relationship between total debt (TDC), TCC, and gross profit margin respectively for SMEs in the north and south of Ghana. For the listed SMEs in Tamale, the results reveal a negative association between SDC, Long-term debt (LDC), TDC, and Tobin’s q (TQ). For SMEs in Kumasi, the findings reveal a negative association between SDC, LDC, TDC, and RoA respectively. For SMEs in Tamale and Techiman, the findings reveal a negative association between all measures of capital structure and RoA at different significant levels. However, there is a positive relationship between TCC and TQ. However, there was a positive relationship between TCC and RoA.