The Influence of Financing Decisions on the Performance of Listed Non-Financial Firms in Tanzania

Abstract

This paper gives empirical evidence from Tanzania on the influence of financing decisions on the performance of non-financial firms listed in the Dar Es Salaam Stock Exchange (DSE). The study used secondary data from 2007 to 2021. EViews software was used to perform the analysis in which descriptive statistics, correlation, and regression analysis were performed. Two leverage ratios were used to measure financing decisions, short-term debt to total assets (STDTA) and total debt to total assets (TDTA), and three accounting-based measures, return on assets (ROA), return on equity (ROE) and gross profit margin (GPM) as a proxy of firm performance. At the same time, firm size (FS) and sales growth (GR) were used as control variables. The findings based on descriptive statistics revealed that non-financial firms depend mainly on short-term debt for their investments. Also, the panel regression model results indicated that STDTA and TDTA negatively impact ROA. Similarly, TDTA was statistically significant with ROA. Moreover, STDTA and TDTA showed mixed results for ROE and GPM, with a significant negative and positive association with ROE, respectively. FS is reported to significantly impact firms' performance, while GR appears to impact ROA positively. The study concludes that the financing decisions of listed non-financial firms in Tanzania weakly influence the performance of firms. Researchers suggest that companies should make suitable financing decisions with attention to lower the cost of capital, enhancing financial stability, and maintaining firm performance.

Keywords

• financing decision
• influence
• model
• performance
• panel regression
• tanzania