FACTORS AFFECTING CAPITAL STRUCTURE OF SMALL AND MEDIUM ENTERPRISES IN THE KUMASI METROPOLIS: A SURVEY

Abstract

This study investigated the determinants of capital structure of small and medium enterprises (SMEs) in the Kumasi Metropolis in the Ashanti region of Ghana. The objectives of the study were, to ascertain whether the use of internal equity was positively or negatively related to the size, age and profitability of the firm. Furthermore, the study examined if the use of external equity was negatively or positively related to the age, size and profitability of the firm. The results revealed that size, age and profitability of the firm were some of the major determinants of capital structure. Finally, the study recommended that SMEs, commercial banks and the Ghana government take measures to improve access to capital by SMEs. Such measures included government intervention in reducing discrimination from the banks as well as encouragement of SMEs training and education so that they are empowered with business and financial management skills.