Effects of Capital Structure on the Financial Performance of SME’s

Abike S B

Published on: 2019-08-05

Abstract

The study examine the effects of capital structure combination as it influences the performance of small and medium enterprises. SMEs are seen as the major sector that enhances the development and growth of the economy through their contribution in terms of innovation, invention, productivity, poverty reduction and alleviation. Financing of SMEs is one of the major constrain that hinder their growth and development. The study adopt both primary and secondary sources of data. Structured questionnaire were administered on the entrepreneur and other stake holders such as, employees manager and interview conducted while financial reports journals and articles were used to gather relevant data for the study. Two hypothesis were tested using regression analysis as a statistical tool. This is because regression analysis is statistical techniques used to find the relations between two or more variables. It was revealed that efficient capital structure influences positively the production capacity of the enterprises. The study however recommends that adequate and less cost of debt, equity should be short and long term source of finance be made available to SMEs, lower interest and rates should be encourage to attract the entrepreneurs to obtain loan.