Date of Conferral







Mohammad Sharifzadeh


Many scholars have concluded that the relationship between capital structure in a business and its financial health is not clearly defined. When making decisions, managers may lack understanding of the relationship between the capital structure practice and financial distress. The purpose of this study was to test the relationship between capital structure practice and financial distress in West African companies. The capital irrelevance theory, pecking order theory, and the trade-off theory guided the research question to ascertain the relationship between capital structure practice and financial distress. The study design was a quantitative correlational design. The population was all public nonfinancial firms in Ghana and Nigeria and stratified sampling was adopted. Data for the study were from 85 sampled firms' published financial statements. A total of 425 firm-years were analyzed. Regression and correlation were the analytical tools employed in answering the research question. The results suggested that firms in West Africa follow the pecking order theory. Increases in debts lead to improvements in businesses' financial health. Increases in the leverage ratio and asset tangibility lead to a deterioration of the business's financial health. Governments should develop the capital markets to help firms access debt and equity capital quickly to improve their businesses' financial health. This study may lead to positive social change in employees' socioeconomic lives, as financially healthy firms can pay their employees on time. As such, employees will experience job security and the likelihood of increased salary as the business's financial health improves.