The Impact of Capital Structure Composition on Financial performance of Firms in The Sugar Industry in Tanzania:

Abstract

This study investigated the relationship between the capital structure composition and the financial performance of sugar firms in Tanzania. The research aimed to address existing research gaps and shed light on the influence of capital structure composition on financial performance, specifically within the Tanzanian sugar estate sector. To achieve this objective, a regression analysis was conducted, with Return on Assets (ROA) serving as the dependent variable, reflecting financial performance measured by ROA, and two components of capital structure: self-financing and the long-term debt to asset ratio. These variables were employed to assess the capital structure composition of the companies under scrutiny. The study uncovered a negative relationship between capital structure composition and financial performance. The research used secondary data sourced from two sugar estate companies operating in Tanzania during the years 2017 to 2022. Data were extracted from reliable sources, including financial statements and annual reports. Employing an Explanatory research design, the study enabled a comprehensive analysis of the relationship between capital structure composition and financial performance. The selection of companies for the study was based on purposive sampling, taking into account their availability and relevance to the research topic. To ensure the validity and reliability of the findings, the regression model underwent crucial diagnostic tests, validating the model's robustness and the statistical soundness of the results. The study's outcomes contribute to the existing knowledge concerning the relationship between capital structure composition and financial performance in the Tanzanian sugar estate sector. In conclusion, the study determined that capital structure composition has no significant impact on financial performance, aligning with the pecking order theory. These findings hold practical significance for managers and decision-makers within sugar estate companies, equipping them with valuable insights to make informed financing decisions, thereby enhancing overall financial performance and profitability