178 © 2022 AESS Publications. All Rights Reserved. ANALYSIS OF THE CAPITAL STRUCTURE AND PROFITABILITY OF MANUFACTURING COMPANIES LISTED ON THE GHANA STOCK EXCHANGE Emmanuel Aidoo 1 Ibrahim Anyass Ahmed 2+ Alhassa Musah 3 1,2 Department of Accounting, University of Education, Winneba School of Business, Ghana. 1 Email: gavnnaaidoo@gmail.com Tel: +233249320505 2 Email: ianyass@uew.edu.gh Tel: +233249172293 3 Takoradi Technical University, Ghana. 3 Email: alhassan.musah@ttu.edu.gh Tel: 0245274200 (+ Corresponding author) ABSTRACT Article History Received: 16 May 2022 Revised: 7 July 2022 Accepted: 19 July 2022 Published: 5 August 2022 Keywords Capital structure Profitability GSE EXIM bank Pecking order theory Free cash flow theory Trade-off theory Irrelevance theory Manufacturing companies. JEL Classification: G32. Manufacturing companies play a crucial role in the economies of most developing countries. Decisions on capital structure portend great importance for businesses vis-à- vis the daunting task of coping with competition within the business landscape. This makes capital structure decisions a reality rather than a myth. Coupled with the daily activities of manufacturing businesses, profitability ensures economic growth and increases in taxes. Profitability is also influenced by the ideal combination of debt and equity. Using descriptive and causal research designs, this study assesses the impact of capital structure on profitability for the period from 2005 to 2019 of listed manufacturing companies in Ghana. Results indicate a significant correlation between capital structure and profitability. The independent variables are found to be inversely related to profitability. Based on these findings, companies may need to minimize the debt component of their capital structure in order to increase profitability. Contribution/Originality: This study uses various models to assess the impact of capital structure on the profitability of manufacturing companies listed on the Ghana Stock Exchange (GSE). It also discusses various theories underpinning capital structure and profitability in order to provide a theoretical perspective. The study contributes to existing literature by segregating the various components of the dependent and independent variables for statistical and econometric analysis. Focusing on listed manufacturing companies, the study spans a 15 year period making it one of the few studies in Ghana which have investigated the issues under consideration for such a period with results which are policy oriented. 1. INTRODUCTION Capital structure and its effect on firm performance is a core issue in finance and accounting (Chisti, Ali, & Sangmi, 2013). The recent competitiveness and changing aspects in the business world has made financial decisions central to a firm’s day-to-day operations and performance. The financial decisions of firms affect almost every aspect and the activities within the company. Capital structure decisions have therefore become progressively important in every business, cutting across all sectors of the economy. As Amidu (2007) contends, the decision relative to the capital structure of a business is one that is herculean. Thus, businesses are saddled with the combination of debt and Asian Journal of Economic Modelling ISSN(e): 2312-3656 ISSN(p): 2313-2884 DOI: 10.55493/5009.v10i3.4567 Vol. 10, No. 3, 178-191. © 2022 AESS Publications. All Rights Reserved. URL: www.aessweb.com